ORAL ANSWERS TO QUESTIONS

CULTURE, MEDIA AND SPORT

The Secretary of State for Culture, Olympics, Media and Sport was asked-

Local Media

Charlie Elphicke: What plans he has for the future of local media.

John Glen: What plans he has for the future of local media.

Jeremy Hunt: We have announced radical plans to secure the future of the local newspaper industry, and have ambitious hopes to turn this country from one of the least well served by local television to one of the best served.

Charlie Elphicke: Many local newspapers have struggled with the recession, but the  East Kent Mercury and the  Dover Express in my constituency have done really well. Do Ministers think it right to praise successful local newspaper groups?

Jeremy Hunt: Yes, especially when they are in one's own constituency. My hon. Friend is absolutely right. The best way in which we can help local newspaper groups is by making it commercially viable for them to turn into multi-media operations which offer their news product over radio, television, iPods, iPads and mobiles. I do not know what the broadcast footprint of Dover television might be, but I have no doubt that it would extend my hon. Friend's reputation as a campaigning Member of Parliament across the channel to the north coast of France.

John Glen: In the light of the uncertainty facing local radio operators such as Spire FM in my constituency over the path for migration to DAB, can the Minister tell us when the owners and operators of such stations will know whether they can secure a future beyond Ofcom's seven-year licensing strategy?

Jeremy Hunt: I thank my hon. Friend for his important question. We greatly value the role of local radio, and we are also very committed to the transition to a digital future. We want to ensure that the timing is such that it does not force people to jettison their analogue radios in huge quantities. Our discussions are progressing rapidly. Last week I had a discussion with the managing director of one of the largest commercial radio groups, and we hope that our discussions will progress further in the next month.

Chris Bryant: There is a great deal of anger in Wales about the way in which the Minister and his Department have treated our local media. ITV Wales will probably not be able to sustain its public service requirements, and S4C has been treated appallingly. There has been no consultation with the people of Wales. There will be a single monopolistic presence in broadcasting in Wales, and the Minister is doing a great disservice to the people of Wales by the way in which he is advancing his cause.

Jeremy Hunt: The mess in local broadcasting in Wales was not created by this Government. It was the hon. Gentleman's party under which audiences for S4C halved over the last decade, and which did absolutely nothing about it. We have sought to find a secure future for S4C that will maintain its independent identity but will also give it the support of our largest broadcaster. We have actually done something about the problem; the hon. Gentleman's party did nothing about it whatsoever.

Ian Lucas: When the Minister does consult on the future of local media, will he speak to elected representatives? I note that he has completely ignored the views of all party leaders in Wales on S4C, including the leader of the Conservatives in Wales. Is not the way in which he is ignoring elected representatives from Wales an absolute disgrace? Will he start talking to people about something which is very keenly felt in Wales, and which he does not understand?

Jeremy Hunt: With respect to the hon. Gentleman, I have talked to many elected representatives, but in particular elected representatives from this House, about the best way forward for S4C. We have put a solution on the table which secures S4C's finances for the whole comprehensive spending review. If the hon. Gentleman has a better solution, perhaps he should put something forward, because we have heard nothing from the Labour party.

Fibre-optic Broadband

Mark Pawsey: If he will discuss with the Secretary of State for Business, Innovation and Skills steps to ensure that the roll-out of fibre-optic broadband is available on an equal basis to all customers in a single community.

Edward Vaizey: I am lucky enough to be a Minister in both the Department for Culture, Media and Sport and the Department for Business, Innovation and Skills, but I intend to discuss the issue with my right hon. Friend the Secretary of State for Culture, Olympics, Media and Sport, who leads on it.

Mark Pawsey: Constituents of mine tell me that on a new housing estate consisting of 900 homes, about 800 are about to receive the new BT Infinity fibre-optic service, but 100 will be left with a poor 0.5 to 1.5 megabit supply. Working professionals rely on an efficient service. Will the Minister make representations to ensure that all users in a community receive the same excellent service?

Edward Vaizey: My hon. Friend speaks up very well for his constituents in regard to this problem, which is connected with the placing of exchanges. One community is often served by two different exchanges. However, I intend to speak to the relevant operator about the issue and report back to him.

London Olympics (Sporting Legacy)

Daniel Poulter: What steps his Department is taking to secure a sporting legacy from the London 2012 Olympics.

Hugh Robertson: I have asked Sport England to develop its £135 million places people play strategy, which along with the investment in the Olympic park will mean a new generation of iconic facilities, protection for our local playing fields and the gold challenge, which will both raise money for charity and get more people playing Olympic sports. The school Olympic-style competition will get competitive sport back in our schools, and all of this is, of course, supported by protecting both the whole sport plans and elite athlete funding in the spending review.

Daniel Poulter: I am sure the Minister is aware that Ipswich has some fantastic sporting facilities, and we are greatly looking forward to hosting the Azerbaijan team during the 2012 Olympics, but may I invite him to visit Ipswich to help us in our aspirations to develop a sports village and a lasting sporting legacy for young people, and to improve healthy lifestyles in Ipswich?

Hugh Robertson: I thank my hon. Friend for that invitation, and I have indeed visited Ipswich on a number of occasions-and watched his football team win a couple of years ago.  [Interruption.] I do not sound surprised at all. The scheme my hon. Friend mentions is precisely the sort of project that will benefit from the type of funding Sport England is now looking at, and I wish him every success with it.

Ben Bradshaw: But will not the decision to scrap school sports partnerships do great damage to the most important part of the Olympics legacy, which is the health and fitness of our young people? What has the Minister said to the Education Secretary to try to persuade him to reverse this disastrous decision?

Hugh Robertson: I think it is fair to say that nobody who is involved in sports issues-as the right hon. Gentleman was in his previous job, of course-would want sports funding to be cut in any way, but we have to realise that this is a decision- [Interruption.] It is all very well moaning about it, but it is a decision taken against the backdrop of the fact that this country pays out £120 million in debt interest every day. Schools funding has been ring-fenced and handed over to head teachers, and I would challenge them to continue this funding where it is proving important and showing benefits, and I hope the right hon. Gentleman would support them in that.

Don Foster: Further to that answer, I greatly welcome the proposal for the new school Olympics to improve competition between schools, but does the Minister recognise that for that to be successful it is important that schools receive a wide range of support, which was previously provided by the school sports partnership? Will he confirm that although the ring-fencing for the funding has gone, the money is still available in schools, and therefore will he confirm that he will continue to work with the Secretary of State for Education to ensure there continues to be a partnership into which schools-

Mr Speaker: Order. We have got the drift of the hon. Gentleman's question, and I am grateful to him for it.

Hugh Robertson: The short answer to that is yes of course I will. The key thing to remember is that the funding has, of course, been handed over to the schools-[Hon. Members: "No, it hasn't."] The schools budgets have been handed over to head teachers and it is entirely up to them to make decisions on it as they please. The head teachers of every single secondary school that I have visited during my time as a Member of Parliament have always asked me for greater control of their budgets; they have now got it.

Tessa Jowell: The Olympics are a national project beyond party politics, and I join the hon. Gentleman in his support for that principle, which I have always maintained, so will he now stand with the coaches, the teachers, the young people and the volunteers who are bewildered and outraged by the decision to dismantle the partnerships that have seen nine out of 10 children play sport regularly? I ask him to do so in the spirit not of party politics, but of respecting that this second Olympic promise is a once-in-a-lifetime opportunity for those young people?

Hugh Robertson: I will absolutely stand behind those people. That is precisely why we changed the amount of money that sport gets from the national lottery, which enabled us to preserve both the whole sport plans and elite athlete funding. No money whatsoever has been cut from the coaching system that comes through the Department for Culture, Media and Sport-indeed, it has been increased. Those are precisely the measures that were opposed by the Labour party. I just say to the right hon. Lady, cross-party co-operation being what it is, that she has to recognise the scale of the financial problem we face: the amount of debt interest that we pay out every day is larger than the entire Exchequer contribution to Sport England in a year. That is the scale of the challenge we face.

Nicky Morgan: The Minister will be aware of the enormous value that sport plays in the economy of Loughborough. Not only will it host Team GB and Team Japan before the Olympics, but a number of elite athletes are based at its university and college. What plans does he have to continue elite athletics funding after 2012 as part of the Olympics legacy?

Hugh Robertson: I thank my hon. Friend for that question. Of course Loughborough is right at the forefront of our plans for London 2012 and the development of sport beyond then. All the elite athlete funding has been not only confirmed for London 2012, but set at precisely the same level for the start of the Rio cycle, framed by our decision on the lottery and the money that UK Sport is getting this year. That is very good news for elite athletes in this country and it means that we will avoid the trap that the Australians fell into after the Sydney games-they front-loaded the funding for their home games and it fell off dramatically afterwards.

Regional Theatre (CSR)

Diana Johnson: What assessment he has made of the effects on financial support for theatres in regions outside the south-east of the outcomes of the comprehensive spending review; and if he will make a statement.

Edward Vaizey: Funding decisions from central Government are the responsibility of the Arts Council. I am delighted to say, however, that as part of the spending review the Arts Council has limited cuts to the budget for arts organisations to just 15%. We have also reformed the lottery money and that will boost the arts by £50 million each year from 2012.

Diana Johnson: For nearly 40 years, the Hull Truck theatre has been a huge success for the city of Hull. The theatre now employs 93 staff and is located in its new £15 million building at Ferensway. Following the £100,000 cut made by Hull city council last week and the £40,000 reduction made by the Arts Council, will the Minister look at this again, taking into account the fact that it is much easier to find private sector investment and jobs on the south bank of the Thames than on the north bank of the Humber? Will he particularly examine the regional funding for theatre in the most disadvantaged communities, such as my own?

Edward Vaizey: I absolutely hear what the hon. Lady has to say, and I pay tribute to that theatre and its reliance on a mix of different elements of arts funding. I would remind her that theatres in Yorkshire received almost £7 million in grant in aid via the Arts Council this year and will continue to be funded by the Arts Council in future.

Tourism Industry (Eastbourne)

Stephen Lloyd: What support his Department provides for the tourism industry in Eastbourne.

John Penrose: The Government aim to attract new tourist visitors from around the world through the activities of VisitBritain and to promote local destinations within the UK through the activities of VisitEngland. I noted that Eastbourne featured as destination of the month according to VisitEngland's June newsletter; the heading was "Visit England's sunniest resort".

Stephen Lloyd: The Minister mentioned that Eastbourne is famed for its record amount of sunshine. Is he aware that it was also ranked No. 1 in a survey of the friendliest holiday towns in the UK? Will he join me in praising those who work in Eastbourne's hospitality industry, and will he and his ministerial colleagues accept my invitation to take their next summer holiday in the sunniest town in Britain?

John Penrose: I would be delighted to spend my holiday in Eastbourne were it not for the fact that I represent Weston-super-Mare, which I hope the hon. Gentleman will accept is an equally wonderful seaside resort. I do, however, join him in congratulating the welcomers in Eastbourne and other parts of the visitor economy, because the welcome accorded to visitors is a tremendously important part of the value that any tourist perceives when they visit any part of the UK.

John Whittingdale: Does the Minister accept that there is now a lot of evidence to suggest that tourism in Eastbourne and in other parts of the country would receive a substantial boost if we moved to daylight saving? Will he therefore consider giving whatever fair wind he can to the Daylight Saving Bill promoted by my hon. Friend the Member for Castle Point (Rebecca Harris), which is to be debated in this House on Friday?

John Penrose: I am on the record from previous oral questions as saying that the potential benefits to the tourism industry are extremely well documented and are widely held to be substantial. I am sure that my hon. Friend will also accept that there are other factors to consider, notably the concerns of many people in northern Scotland and Northern Ireland about the effect on other parts of the economy. Therefore, we want to try to ensure that we are not leaving any part of the UK behind or imposing a decision without consent. I suspect that, with any luck, that will be part of the debate on Friday.

Philanthropy (Arts)

Mel Stride: What progress he has made on arrangements to support philanthropy in the arts.

Jeremy Hunt: Boosting philanthropy is central to our strategy to help the arts weather an extremely difficult economic storm. We will announce a package of measures to do that before Christmas.

Mel Stride: Smaller organisations often lack the skills and experience to raise money from private sources. What can my right hon. Friend do to help smaller arts organisations, such as the Devon Guild of Craftsmen in my constituency, to raise even more money through philanthropy?

Jeremy Hunt: I commend my hon. Friend on his work for small arts organisations in his constituency. They are the lifeblood of the arts world. Organisations such as The Factory, an amateur arts group that puts on productions of "Hamlet" all over the country in church halls, are the kinds of organisations that nurture the acting talent of the future. They do not always have the fundraising capacity, however, to raise money from private donors. That is why, with the Arts Council, we will announce a series of measures to help rectify that. I hope that that will please my hon. Friend.

Steve Rotheram: In his Department's structural reform plan, the Secretary of State made clear his support for philanthropic giving to supplement funding to arts and cultural organisations. Will he therefore join me in raising money for institutions in Liverpool? If I promise to get my mates to have a whip-round and to donate a few bob each, will he ask his 22 millionaire friends in the Cabinet to match our donations in proportion with their wealth?

Jeremy Hunt: I will happily give the hon. Gentleman any support I can in his attempts to boost philanthropy in Liverpool, as I will to attempts in the rest of the country. He is absolutely right-one of the best ways to boost philanthropy is to find a rich person and ask them to chair the fundraising committee.

Sarah Newton: What progress has the Minister made in ensuring that national museums financially support their offspring in the regions, such as the National Maritime museum in Falmouth in my constituency?

Jeremy Hunt: My hon. Friend makes an important point. In the settlement letter that we gave to all the national museums, which protected their funding to a much greater extent than was possible for many other parts of the public sector, we asked them to come forward with proposals through which they would mentor and help smaller arts organisations in the regions with their fundraising. We hope to announce progress on that front in the next few weeks.

Ivan Lewis: The Department's business plan states, intriguingly, that the Secretary of State's philanthropy strategy will incorporate "insights from behavioural science". Does he accept that if such a strategy is built solely on a nudge and a wink, or advice from a psychologist, it will be a damp squib in exactly the same way as a nudge and a wink, rather than the coalition's promised tax break, is doing nothing to support the growth of the UK video games industry?

Jeremy Hunt: It is all very well for the hon. Gentleman to carp from the sidelines, but where are his proposals to boost philanthropy? Where are his proposals to help increase the money going to the front line? We are doing things to try to boost the amount of private giving to deal with the economic crisis that we inherited from his Government. He should help us, support us and contribute constructively. I am happy to nudge him to do so.

Library Provision (CSR)

Chris Evans: What assessment he has made of the likely effects on library provision of the outcomes of the comprehensive spending review.

Edward Vaizey: Local authorities have a statutory duty to provide a comprehensive and efficient library service. I shall be writing to all local authorities this week to remind them of that. We have put in place a plan through the future libraries programme to help local authorities take forward their library service.

Chris Evans: Libraries play an important role in adult literacy programmes. Will the Minister guarantee that those programmes will be kept in any future Government plans?

Edward Vaizey: As I said, the library service is a local authority service so it is up to local authority services to deliver it. I can also tell the hon. Gentleman with my BIS hat on that the excellent Minister for Further Education, Skills and Lifelong Learning has preserved a substantial amount of funding for adult literacy programmes.

Andrew Bridgen: In my county of Leicestershire we are seeing increased use of our libraries. Will the Minister reaffirm his commitment to support the important services they provide?

Edward Vaizey: I would certainly support the important services that Leicestershire libraries provide. I have visited Leicestershire libraries. May I also take this opportunity to praise Leicestershire's excellent music service, which I hope the county will preserve?

Eric Illsley: How does the Minister square what he has just said about preserving libraries with the effects of the comprehensive spending review and the cuts in financing to local government, given that one of the first areas to face closure will be local library provision?

Edward Vaizey: As I have said, libraries are a statutory service, so local authorities must provide them, and providing that they have a far-seeing and imaginative plan, they can do so. There are many excellent local library services up and down the country, and the future libraries programme is making sure that that knowledge is widely disseminated.

Transport (London Olympics)

Bob Russell: What discussions he has had with the Secretary of State for Transport on the use of the surface rail route between Liverpool Street and Stratford as part of the transport network for the London 2012 Olympics.

Hugh Robertson: Although I have regular discussions with the Transport Secretary on a variety of Olympic transport issues, I have had no detailed discussions with him about the particular use of this route.

Bob Russell: I encourage the Minister to do just that. The eyes of the world will be on east London in 2012 and I pray that very few people cast their eyes on the trackside wasteland and derelict buildings between London Liverpool Street and Bethnal Green. Will he, in the spirit of joined-up government and of involving the Mayor of London, bring people together to ensure that that stretch of the line matches what is attractive in Stratford?

Hugh Robertson: The simple answer to that question is yes, of course I can. About 200,000 people use Liverpool Street station every morning and we anticipate that there will be about 45,000 to 50,000 extra during the games, many of whom will not be going in and out at peak time and will be going in the opposite direction to the normal commuter flow, but I take his point and will see what I can do about it.

Universal Broadband Service

Stephen Timms: What discussions he has had with the Secretary of State for Business, Innovation and Skills on the likely effects on competitiveness of the change in the time scale for the delivery of a universal broadband service.

Edward Vaizey: I have not discussed this with the Secretary of State for Business, Innovation and Skills, but I have discussed it with the Secretary of State for Culture, Olympics, Media and Sport and we both agree that the new target of having the best superfast broadband in Europe by 2015 is the best way to proceed on broadband. I have also praised my right hon. Friend for having secured substantial funding for broadband roll-out.

Stephen Timms: This matter is very important for competitiveness, especially at a time when we need many new jobs to be created by companies in rural areas as well as in urban areas. Before the election, the Minister's right hon. Friend the Secretary of State for Culture, Olympics, Media and Sport described the plan to secure 2 megabits per second broadband access universally by 2012 as woefully unambitious, but since the election he has simply deferred the deadline by three years to 2015. What became of his ambition?

Edward Vaizey: Our ambition doubled, tripled and became superfast. We learned from broadband providers that they were already in a position to implement superfast broadband, so why should we push them down the slow channel when we could push them down the fast channel? That is why the pilots announced by the Secretary of State will implement superfast broadband for rural areas. I know that the right hon. Gentleman will welcome that given his experience in the previous Government.

Duncan Hames: Even with impressive progress, some communities such as Atworth in my constituency still face being left out, but nearly all the schools in my constituency have access to broadband speeds of at least 9 megabits per second. Will the Minister consider opening the various grids for learning so that people can pay to piggyback on broadband access from their schools out of hours?

Edward Vaizey: The hon. Gentleman makes an excellent point. We will be publishing a broadband strategy document at the beginning of the month which will address this specific issue. There are technical difficulties with achieving that, but if they can be overcome, it should certainly be done.

Tourism Industry (Wells)

Tessa Munt: What support his Department provides for the tourism industry in Wells.

John Penrose: As I said earlier to my hon. Friend the Member for Eastbourne (Stephen Lloyd), the Government are investing through VisitBritain both by trying to attract more foreign visitors to the UK and by attempting to refocus VisitEngland to make sure that it is promoting English destinations of all kinds, such as those in the constituency of the hon. Member for Wells (Tessa Munt), to we Brits.

Tessa Munt: In common with many of the tourism and leisure businesses along the Somerset coastline, including the thousands of small bed-and-breakfast businesses, many of which have diversified from farming, I support the suggested trial of double summertime, about which the House will hear more in Friday's debate on the Daylight Saving Bill. Given the importance of this matter to hon. Members on both sides of the House and to leisure and tourism businesses in Somerset, including north Somerset, will the Minister give assurances that he will work with his colleagues in BIS, that the Bill will not be talked out and that the matter will proceed to a vote?

John Penrose: I am afraid that the hon. Lady will have to wait for Friday to see who wants to speak for how long during the debate, but I can assure her that I have already engaged in substantial discussions with my colleagues in BIS on this. My earlier answer to my hon. Friend the Member for Maldon (Mr Whittingdale), from the Culture, Media and Sport Committee, stands: this proposal could be tremendously valuable to the tourism industry as a whole, but that is not the only factor to be considered. There are issues for people who live north of border that need to be taken into account as well.

Gloria De Piero: Has the Minister made any impact assessment on increasing VAT to 20% on the tourism industry in Wells and elsewhere in Britain?

John Penrose: As I am sure everybody here knows, taxation matters are for the Treasury not for the Department for Culture, Media and Sport. However, I am sure that the hon. Lady realises that any attempt to try to reduce VAT in any one sector will need to come with a fully costed proposal about the impact on this country's large deficit, which we are trying to bring down. Given the impact of deficits in other countries in Europe, it will be very difficult for anybody, in the short to medium term at least, to advance plans of that kind-without a fully costed proposal-without seeming to be extremely fiscally dangerous to this country's economy.

Philanthropy (Arts)

Amber Rudd: What progress he has made on arrangements to support philanthropy in the arts.

Jeremy Hunt: Our plans to boost philanthropy include boosting corporate philanthropy, incentivising individual giving and boosting giving in the regions as well as in London.

Amber Rudd: Has the Secretary of State considered more specifically how organisations outside London might attract support for their businesses or their charitable organisations, such as Gizmo in my constituency, which provides creative workshops for young people? How can they attract financial support outside London?

Jeremy Hunt: My hon. Friend raises a very important point. We want to do everything possible to help organisations such as Gizmo, and indeed to help people raise money to support the reconstruction of Hastings pier. The truth is that there is a lot of regional philanthropy; we can look at what Roger de Haan has done in Folkestone, what Sir John Zochonis has done at the Lowry and what Sir Harry Djanogly has done to support the Nottingham Playhouse. But it is not enough. It is much tougher than raising money in London, which is why the package of measures we shall be announcing will aim to make it much easier.

Alison McGovern: The Secretary of State knows, as I do, that fundraising and finding philanthropists for the arts and culture is a difficult, although rewarding, job. It is being made much harder by the turbulence caused by Government arts cuts; for example, English Heritage looks set to close its outreach department. Does the Secretary of State think it is realistic to ask even more from a demoralised and decreasing body of staff who are working to save the arts?

Jeremy Hunt: The hon. Lady is right: this is a very tough period for arts and heritage organisations, and we are doing everything we can to help them weather the storm. In this country, philanthropic giving to culture is £6 per head of population; in America, it is £37 per head of population. We are not America, but we would be neglecting our duty if we did not ask if there were things we could do to boost private giving, and that is what we are doing.

2018 FIFA World Cup

Jessica Lee: What role the Government has played in supporting the Football Association's bid for the 2018 FIFA World cup.

Jeremy Hunt: I briefed the Cabinet this morning on our chances for the 2018 World cup bid, and I know the whole House will want to wish the bid team the very best of luck in Zurich this week. I shall be going with my hon. Friend the Minister for Sport and the Olympics. The Prime Minister, the Deputy Prime Minister and the whole Government are wholeheartedly behind the bid.

Jessica Lee: A successful World cup bid would boost support for football right through to local divisions and local clubs. The coalition agreement sets out a commitment to co-operative-run football clubs. Supporters of Ilkeston Town football club in my constituency recently submitted a bid to run the club. Although the bid itself was unsuccessful, the club is now secured under new ownership, but what plans do the Government have to promote community-run football clubs?

Jeremy Hunt: My hon. Friend raises an important point. We want to see whether it is possible to create an easier pathway for supporters to build up the capital to enable them to take ownership of clubs in a way that does not threaten the investment by other people which has also been so important for the world of football. Obviously, the week before the World cup bid is not the time to bring forward football governance proposals, but we will be looking at the situation very carefully and bringing other measures to the House shortly afterwards.

Ian Austin: We are right behind the Government's campaign to bring the World cup to this country, because it would do a huge amount to boost children's interest in sport. It is important that youngsters have good facilities and the right coaching, too. The Government claim that the money for specialist sports colleges is going into un-ring-fenced schools budgets, but is it not the case that the £162 million for the Youth Sport Trust, which funds school sports partnerships, is not being passed over to schools? That money is just being cut.

Jeremy Hunt: It is not the case. We are committed to a sporting legacy for 2012 for every single child, no matter what their background or what school they go to. The legacy that we had from the hon. Gentleman's Government was four out of five older children not doing any sport at all, and an Olympic-sized hole in the Budget.

Creative Industries

Jonathan Reynolds: What recent representations he has received on his Department's programmes to assist the creative industries.

Edward Vaizey: I receive regular representations from across the creative industries- [Interruption] I think debate on the previous question is still going on, but I shall try and talk across it-on all aspects of my Department's support. I also work closely with other Government Departments, because I am lucky enough to be a Minister in the Department for Business, Innovation and Skills as well.

Jonathan Reynolds: May I ask the Minister again to look at the issue of tax relief for the computer games industry?

Edward Vaizey: That is a matter for the Treasury.

Topical Questions

James Gray: If he will make a statement on his departmental responsibilities.

Jeremy Hunt: As well as wishing every success to the England 2018 bid team this week, we wish every success to Andrew Strauss and the English cricket team in Australia and congratulate him, Jonathan Trott and particularly Alastair Cook on their outstanding performances over the weekend.

James Gray: The Government's commitment to rural broadband is laudable, but does the Secretary of State agree that providers make a large profit out of urban provision of broadband, but that in rural areas such as my own they make a large loss? What will he do, therefore, to make sure that the £500-odd million that he is committing to broadband will be spread not equally between urban and rural areas, but especially towards rural areas to help businesses and homes which so badly need it?

Jeremy Hunt: The money that we have secured from the licence fee settlement is for the part of the country that we believe the market will not satisfy-that is to say, approximately a third of homes including, I believe, homes in his constituency, where we think that left to its own, the market would not provide broadband. We have every confidence that we will have a solution that is not just 2 meg per home, as was the limit of the ambitions of the previous Government, but the best superfast broadband network in Europe.

Ivan Lewis: I start by wishing the Secretary of State and Team England all the best with their mission this week to secure the 2018 World cup. On that, he and the Government will have our full support.
	In relation to youth sport, the Secretary of State must come clean. He has overall responsibility for the future of sport in this country. He briefs the press that he is against the decision to dismantle support for school sport, yet on the record he is silent. Does he support the ending of all funding for the Youth Sport Trust and the dismantling of school sports partnerships-yes or no? Was he personally involved in the decision to transfer two questions on youth sport to the Department for Education so as to limit debate on the issue today? Does he accept that 95% of young people are participating in sport for two hours a week in schools, rather than the figure that he inaccurately quoted just a few moments ago and misled the House?

Jeremy Hunt: rose-

Mr Speaker: Order. The hon. Member for Bury South (Mr Lewis) must not accuse a Minister of misleading the House. I assume that he meant to include the word "inadvertently" and I will insert it for him. I think we are clear about that.

Jeremy Hunt: I thank the shadow Culture Secretary for his fourth question. Let me answer plainly. School sports partnerships are not being dismantled. We are committed to competitive sport, and the legacy of the previous Government was only one in five children regularly playing inter-school sport. To answer the hon. Gentleman's question about older children, yes, in year 7, four in five children are not playing sport at all. We want to do something about it. That is what we want our legacy to be, and that means that we have to do things differently.

Robert Halfon: Following the disappointing decision by the BBC to screen "The Accused", denigrating our British Army, and the subsequent criticism by the head of the armed forces, does the Secretary of State agree that it is time to democratise the licence fee and give licence fee payers a real say over our programming?

Jeremy Hunt: I understand my hon. Friend's concerns about the issue in question. He will agree with me that in a free country, it is important that the Government should not dictate to our national broadcaster what it says or broadcasts. However, he is right to say that we need to look at governance of the BBC. There is cross-party agreement that the BBC Trust set up by the previous Government has not worked in the way that was intended, and as we come up to the renewal of the BBC charter, we will be looking closely at ways to improve the democratic accountability of the BBC.

Bill Esterson: Can I draw the Secretary of State's attention to Chesterfield high school in my constituency, a specialist sports college which has been told that it has lost its £180,000 grant, and that the money will not go into its main grant? It was something that the Secretary of State for Education did not deny last week when I put a similar point to him about the situation throughout the country. Does the Culture Secretary agree that a cut in specialist sports grants will lead to a reduction in the number of young people taking part in sport?

Jeremy Hunt: First, although I do not know exactly what happens in Chesterfield, I have no reason to believe that the work done by school sports partnerships is not excellent there as well. School sports partnerships can continue; however, the philosophy of this Government is to devolve responsibility for budgets to heads, because we think that they are best placed to know how their money should be spent. In Chesterfield, as, I am sure, in large parts of the country, I have every confidence that heads will decide to continue to support their school sports partnerships.

David Amess: With a number of countries already considering basing their camps in Southend for the Olympic games, and with our new diving facility opening tomorrow, does my right hon. Friend agree that Southend pier, the longest in the world, should, via a fireworks display, be included in the opening and closing ceremonies for the Olympics?

Hugh Robertson: I congratulate my hon. Friend on everything being achieved in his constituency to promote sport and, indeed, the London Olympics, and I am absolutely delighted that the local authority is going to lay on a fireworks display. I have no doubt that it will be the equal of anything we saw in Beijing a couple of years ago, and I wish him every good fortune with that.

Michael Dugher: Is the Minister aware that cuts in central Government support disproportionately hurt areas such as Barnsley, where council tax receipts are low and needs are higher? That is why the local authority is being forced by this Government to look at library closures. Meanwhile, in Surrey, council tax receipts are very high, so local authorities are less reliant on central Government and are not looking at library closures. Is that fair, and why are the Government creating a postcode lottery in library provision?

Edward Vaizey: The Government are not creating a postcode lottery. Many excellent local authorities throughout the country-regardless of their relative wealth-provide absolutely fantastic libraries, and with a little imagination and, perhaps, by participating in our future libraries programme Barnsley, too, can provide a 21st century library service for the hon. Gentleman's constituents.

Alun Cairns: Can the Secretary of State confirm that there will be no change to the chairmanship of S4C? Does he recognise the insecurity that some S4C authority members are causing staff, and can he confirm the Government's commitment to an S4C that is operationally and editorially independent?

Jeremy Hunt: I can absolutely confirm this Government's wholehearted commitment to an S4C with its own distinct identity, operational independence and the support and expertise of our most important and largest national broadcaster. I urge the authority to clear up the confusion over the leadership at S4C as soon as possible, because it owes nothing less to the people of Wales.

Karl Turner: Given the Secretary of State for Education's disgraceful announcement that £160 million will be cut from school sports funding, what plan does the Sports Minister have to compensate children in my constituency whose health and well-being will suffer as a result of his Government's policy?

Jeremy Hunt: Our plan for the children in the hon. Gentleman's constituency, as for the children in every constituency, is that more of them will do sport, more of them will do competitive sport, and we will have stronger, more effective, bottom-up school sports partnerships.

Jo Swinson: Top Commonwealth games officials are meeting in Glasgow today to discuss the preparations for the 2014 games, including how to avoid the dreadful problems that we saw in the run-up to Delhi. Can the Secretary of State confirm that the 2012 Olympics team is similarly learning the lessons from Delhi, and that his Department will give the teams for 2012, 2014 and, if things go well, 2018 every possible support?

Hugh Robertson: The simple answer is yes. It is fair to say, and I will always say, that the Commonwealth games in Delhi were always going to be pretty tricky, because they were up against a very tight construction timetable, the security situation was extremely oppressive and the monsoon was unusually heavy and ran late. I am glad to say that none of those problems affects the delivery of the London 2012 Olympics, nor I am sure-even though it rains quite a lot in Glasgow-will they affect the Glasgow 2014 Commonwealth games.

Jim Cunningham: Is the Secretary of State aware that people, certainly those in Coventry and the rest of the west midlands, will be dismayed that the Youth Sport Trust and school youth services are going to be wound up? Have the Government not got form on that? I do not want to get the answer that it is all the fault of the previous Government; in the '80s and '90s, the right hon. Gentleman's Government sold off school fields and the youth service as well.

Jeremy Hunt: With respect to the selling of school playing fields, both the last Conservative Government and the last Labour Government were at fault. We are doing something to put the situation right, which is why my hon. Friend the Minister for Sport and the Olympics announced a £10 million fund to put playing fields into trust. We have done something; the other side talked about it.
	With respect to competitive sport in schools, it is our ambition and determination to increase the number of children who do competitive support from the woefully low levels that we inherited.

Justin Tomlinson: Will the Minister encourage local authorities to explore shared services and facilities to help protect and enhance community libraries?

Edward Vaizey: Absolutely. I commend Swindon borough council, which has moved one of its libraries into an arts centre and seen attendances rise. Perhaps the hon. Member for Barnsley East (Michael Dugher) can take that experience back to his council.

Barbara Keeley: It is known that a proportion of girls and young women dislike competitive sport, and that reduces their participation levels compared with boys and young men. If we are to ensure that the Olympic legacy meets the needs of all young people, what is the Government's policy to increase participation among young people who just do not like competitive sport?

Hugh Robertson: I am glad to tell the hon. Lady that precisely those plans are contained in the Sport England plan "People, Places, Play". It is also worth mentioning that at schools benefiting from the pupil premium, precisely those groups will be able to benefit. Indeed, the early evidence is that schools that have had extra money from the academies programme have spent it on sports equipment.

Several hon. Members: rose -

Mr Speaker: Order. We must move on.

Hon. Members: What about points of order?

Mr Speaker: Points of order come after Question Time and statements, so there will be an opportunity for them later.

LEADER OF THE HOUSE

The Leader of the House was asked-

Scrutiny

Philip Hollobone: If he will assess the effectiveness of (a) oral questions to the Leader of the House and (b) the weekly Business Question as an opportunity for scrutiny.

George Young: I believe that both procedures provide an effective opportunity for hon. Members to hold the Government to account for their management of the business of the House.

Philip Hollobone: My right hon. Friend is open to more parliamentary scrutiny on the Floor of the House than any other Minister of the Crown. Will he support my proposals for this present Question Time slot to be merged with his business questions? Together with other consequential changes in the oral questions timetable, that would lead to more time being available for questions to the Department for Transport.

George Young: I am grateful to my hon. Friend for that suggestion. If this slot was moved from where it is at the moment, it would not advantage the Department for Transport but the Department for Culture, Media and Sport, from which we have just heard. The answer to my hon. Friend is this. Within three years, we will be moving towards a House business Committee. At that point, it will make sense to look at how we deal with the whole issue of business questions in the light of new arrangements for that responsibility.

Private Members' Bills

Duncan Hames: What assessment he has made of proposals for proceedings on private Members' Bills to take place on days other than Fridays.

David Heath: The Procedure Committee has recently announced that it will conduct an inquiry into the parliamentary calendar that could consider the issue of private Members' Bills taking place on a day other than Friday. As my right hon. Friend the Member for East Yorkshire (Mr Knight) has indicated, right hon. and hon. Members will have an opportunity to make representations on the issue.

Duncan Hames: I have written to the Chair of that Committee accordingly. Without a sufficient number of Members on Fridays, private Members' Bills are at the mercy of obfuscation, filibusters and even poetry-tactics that only damage the reputation of the House. Will the Leader of the House explore ways to protect private Members' Bills from such antisocial behaviour?

David Heath: I am quite sure, Mr Speaker, that in your capable hands and those of your deputies there is no question of filibustering on Fridays. Poetry, however, there may be. Whether that is antisocial or otherwise is for Members to judge. Clearly, procedural devices are sometimes used on Fridays. Any move to remove some of those devices would be a matter for the House rather than for the Government.

Helen Jones: Does the Deputy Leader of the House agree that whatever day is chosen for private Members' Bills, it is important that opinion on those Bills is tested in the Lobby, not talked out by dubious practices such as speaking for an hour and 39 minutes on a two-clause Bill or quoting what was very bad poetry? What can he do to protect the rights of Back-Bench Members with regard to their private Members' Bills? Will he give the House an assurance that the Government will not use these tactics to block debate on the Gangmasters Licensing (Extension to Construction Industry) Bill, which is of vital importance for safety in the construction industry?

David Heath: I remember a very frustrating period of my life in the last Session of Parliament when I had a private Member's Bill-a very important one about fuel poverty-and it seemed to me that some Members on the Government side, including the Minister, spoke at rather greater length than I had expected to avoid its making further progress. I therefore understand the point that the hon. Lady is making. I repeat, however, that this is a matter for the Procedure Committee to look at, and I am sure that she will make her observations known to that Committee.

John Cryer: Does the Deputy Leader of the House accept that a precedent for this arose during the passage of the City of London (Ward Elections) Bill, when the then Government used regularly to split business during a Monday or Tuesday evening to leave three hours for discussion of that Bill? It was a private Bill rather than a private Member's Bill. Personally, I think it was a rotten Bill, and I would rather have hacked my head off than vote for it. Nevertheless, it established a precedent, and surely private Members' Bills could be treated in the same way.

David Heath: I really cannot support the process of head hacking as a way of expressing dissent with what was, I think, a Bill supported by the Government of the party of which the hon. Gentleman is a member. There is a slightly different procedure for private Bills as opposed to private Members' Bills. Again, the points that he makes should be made to the Procedure Committee, which can then take them into account when coming back to the House with recommendations.

Orientation Programmes (General Election)

Greg Hands: What discussions he has had with the House of Commons Commission on the effectiveness of orientation programmes for hon. Members after the May 2010 general election.

David Heath: My right hon. Friend the Leader of the House has had no specific discussion with the Commission on this subject, but I am sure that the whole House, particularly hon. Members elected for the first time in May this year, will wish to join me in thanking the staff of the House for the considerable effort that went into delivering the induction programme.

Greg Hands: My hon. Friend has spoken about the great successes of the programme earlier this year for new Members, but surely he must agree that existing Members should not be overlooked. I note that there is one Member who has spoken here only once since the election, has tabled no questions, and has made only five of the 131 votes that he might have made. Will my hon. Friend agree to have a word with the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), assuming that he can be found, and perhaps suggest that some orientation might be needed?

David Heath: I am sure, Mr Speaker, that it would be invidious to discuss the attendance record of any individual Member. It does worry me, I have to say, if some Members have problems reconciling the competing pressures of writing books and making well-paid speeches with their duties in this House. However, I hope that in the context of the present economic situation, those with particular experience of, say, ending boom and bust will feel able to contribute to our debates.

Standing Orders (Affirmative Resolution)

Paul Blomfield: What recent discussions he has had on the adequacy of the provisions in Standing Orders for debates on the Floor of the House on instruments subject to affirmative resolution.

David Heath: Standing Order No. 118 provides that an instrument subject to affirmative resolution shall not be referred to a Delegated Legislation Committee if a Minister has given notice of a motion to that effect. I believe that this is adequate to ensure that an instrument can be debated on the Floor of the House when there is agreement to do so.

Paul Blomfield: I thank the Deputy Leader of the House for his answer. Does he agree, however, that we will putting the cart before the horse if we debate the statutory instrument on university funding before the publication of the Government's White Paper on higher education, simply to alleviate the discomfort of Liberal Democrat MPs?

David Heath: That puts me in some difficulty, because I understood that the Opposition had tabled a motion on this very subject for next week, before the White Paper is published, so Opposition Front Benchers obviously do not agree with the hon. Gentleman.

HOUSE OF COMMONS COMMISSION

The hon. Member for Caithness, Sutherland and Easter Ross, representing the House of Commons Commission, was asked-

Speaker's Conference

Jo Swinson: What progress the House of Commons Commission has made in implementing the recommendations made to it by the Speaker's Conference on Parliamentary Representation.

Frank Doran: I will answer for the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). The House authorities have continued to work on those recommendations that fall within the remit of the House administration. For instance, new educational resources for schools have been produced to reflect changes in the new Parliament and are available free to Members and schools in hard copy and online.

Jo Swinson: I welcome the hon. Gentleman to his new role on the House of Commons Commission. It is excellent news that since the Speaker's Conference, the parliamentary nursery has opened. The Speaker's Conference recommended action on another barrier to MPs who are parents of young children, which was to consider allowing young babies to accompany their MP parent into the voting Lobby. Surely that small, sensible change is preferable to the current situation, whereby babies are left in Whips' offices during votes.

Frank Doran: A proposal on that issue is being considered by the Speaker and by the Commission, and that will be pursued.

LEADER OF THE HOUSE

The Leader of the House was asked-

Welsh Grand Committee

Alun Michael: What recent representations he has received on the Welsh Grand Committee's effectiveness as a forum for discussing Government policy as it relates to Wales.

George Young: Hon. and right hon. Members, including the right hon. Gentleman, have made recent representations to me on this issue. I believe that the Welsh Grand Committee provides an effective forum for Members representing constituencies in Wales to debate matters that relate exclusively to Wales.

Alun Michael: I agree with the Leader of the House, but the Committee cannot be effective if it does not meet. He has always shown enormous respect for the conventions of the House. As a former Secretary of State for Wales, I think that previous Conservative and Labour Secretaries of State for Wales have shown respect to the convention of working consensually with all parties to arrange meetings and topics for debate. Will the Leader of the House have a gentle word with the current Secretary of State for Wales to persuade her of the benefits of such a consensual approach?

George Young: No one is more in favour of consensus than myself. The Welsh Grand Committee will have its second meeting of the Session this week. That makes two meetings in six months. In 2005, it met once in the Session, in 2006, it met twice and in 2007, it met once. Our record is better than that of our predecessors.

HOUSE OF COMMONS COMMISSION

The hon. Member for Caithness, Sutherland and Easter Ross, representing the House of Commons Commission, was asked-

Network Services (Regional News)

Diana Johnson: What progress has been made on upgrading network services to enable access by hon. Members to regional televisions news programmes on the Parliamentary Estate.

Frank Doran: It is already possible to view the regional television news content and services that broadcasters make available on their websites, via the internet. In addition, the annunciator screens carry national and international television news.

Diana Johnson: I thank my hon. Friend for that answer. It seems strange that Members can watch subscription sports channels on the network, but cannot access our regional news programmes. Can this matter be considered again, because most of my constituents expect me to be up to date with regional as well as national news.

Frank Doran: As a Scot, I understand the hon. Lady's problem. We have two systems. One is the television system, the main function of which is to provide annunciator services and the feed from the two Chambers. The second is the internet. The television system has only 23 channels. I am not sure how many regional news programmes there are, but it would not be possible to have them all on the system. However, they are all on the internet, which is part of the House service.

Mr Speaker: Luciana Berger? No. I therefore deem that it is time for the statement.

Autumn Forecast

George Osborne: I would like to make a statement regarding the Office for Budget Responsibility's first autumn forecast. I will also, with your permission, Mr Speaker, inform the House about further measures that the Government are taking to support economic growth, including the new growth review launched today and a far-reaching programme of reforms to our corporate tax system. Following yesterday's announcement by European Finance Ministers, I would like to take the first opportunity to update the House about the Irish situation and the UK's involvement.
	Copies of the OBR's autumn forecast were made available in the Vote Office earlier today. We should take a moment to recognise the significance of this occasion and the practical demonstration of this Government's commitment to transparency and independent forecasting. Today is the first time that Members of this House will engage in debate about an autumn forecast produced by the independent Office for Budget Responsibility, rather than conjured up by the Chancellor of the Exchequer, and available to read two hours before the statement. This is also the first forecast by the new independent chair of the OBR, Robert Chote, with the other members of the budget responsibility committee, Stephen Nickell and Graham Parker, whose appointments were approved by all Treasury Committee members from both sides of the House. As a result, I am sure the country can have full confidence in the independence of these forecasts.
	The OBR report published today includes some 150 pages of information-an unprecedented level of detail and transparency, much of it of the kind available to previous Governments but never before published. I should like to thank the budget responsibility committee and the staff of the OBR for their hard work in putting together this autumn forecast. I hope that we now entrench this major improvement in the making of fiscal policy by passing the legislation currently before Parliament.
	Although today's figures are of course independent, they are still just forecasts, and we must treat them with a degree of caution, as one should treat any economic forecast. Indeed, the OBR is explicit about that, illustrating the uncertainty surrounding any economic forecasts with the use of fan charts rather than claiming the infallible certainty that my predecessors asserted when they provided their forecasts. The only thing that was infallible and certain was that those political forecasts were usually wrong.
	With that caution in mind, let me turn to the forecast. After the deepest recession since the war, the greatest budget deficit in our peacetime history and the biggest banking crisis of our lifetime, recovery was always going to be more challenging than after previous recessions, but the message from the Office for Budget Responsibility is that Britain's economic recovery is on track. The economy is growing, more jobs are being created and the deficit is falling. Its central forecast is for sustainable growth of over 2% in each of the next five years, and employment rising in each and every year. Indeed, employment and gross domestic product are higher in every quarter and every year than in the June forecast.
	At a time when markets are gripped by fears about Government finances across Europe, today we see that the Government were absolutely right to take decisive action to take Britain out of the financial danger zone. Britain is on course both to grow the economy and balance the books, something that some people repeatedly said could not happen.
	Let me take the House through the detail of the forecast. The forecasts for the economy are broadly in line with those produced for the June Budget, despite the more challenging international conditions. I should also like to point out that they are very similar to the European Commission forecasts for the UK, which also happened to be published today. Indeed, the European Commission today forecast that Britain would grow faster over the next two years than Germany, France, Japan, the United States of America and the average for the eurozone and the European Union.
	The OBR forecasts real GDP growth of 1.8% this year, 2.1% next year, 2.6% in 2012, 2.9% in 2013, 2.8% in 2014 and 2.7% in 2015. Growth this year is now expected to be considerably higher than was forecast in June. In the OBR's judgment, some of that improvement is likely to be permanent and some of it a temporary impact of stock-building. As a result, it forecasts that the rate of growth next year will be 0.2 percentage points below its forecast in June. It also predicts above-trend growth for the four years after that, but the level of GDP, or indeed the overall size of our economy, is forecast to be about half a percent higher next year than was forecast in June, and indeed higher throughout the whole forecast period.
	Some have made predictions of a so-called double-dip recession, and although the OBR points out that
	"growth has been volatile, as this is a common characteristic of post recession recoveries",
	its central view is that there will be no double-dip recession. Its forecast is growth next year of more than 2%, and it expects that in the slowest quarter of growth, the first quarter of next year, it will be 0.3%, rising back to 0.7% by the last quarter of next year. It also forecasts that consumer prices index inflation will fall from 3.2% in 2010 to 1.9% in 2012, once the short-term effects of the VAT rise and other temporary factors fall away.
	Crucially, the OBR forecasts a gradual rebalancing of the economy as we move away from an economy built on debt to one in which we invest and export-again, something that some people said would not happen. It expects more demand to come from business investment, which is set to grow by over 8% for each of the next four years, as well as exports, which are expected to grow on average by over 6% per year. That new model of sustainable economic growth will rebalance the economy towards investment and exports and away from an unhealthy dependence on private debt and public deficit. It will bring to an end the unsustainable situation that saw families save less and less each year, so that they ended up, in the words of today's report,
	"effectively borrowing money to purchase increasingly expensive houses."
	The OBR also published today a full forecast for the labour market-something that, I should like to point out, previous Chancellors chose not to do. Employment is forecast to grow in every year of this Parliament. Total employment is expected to rise from 29 million to 30.1 million-that is over 1 million additional new jobs. Thanks to faster-than-expected growth in the economy, the OBR now expects the unemployment rate to be slightly lower this year at 7.9%, instead of 8.1%. Its forecast for the unemployment rate for next year is unchanged from the June Budget at 8%. For future years, the OBR predicts a gradual decrease in unemployment, with the rate falling every year. By the end of the Parliament, the OBR forecasts that it will fall to just above 6%, which is about 500,000 fewer unemployed people than at the beginning of this Parliament.
	The trend in the claimant count is similar to that for the internationally recognised labour force survey measure of unemployment. However, the level is expected to be higher. The OBR explained that the revision is mainly due to a change in the way that flows from employment and support allowance on to jobseeker's allowance will take place as a result of the new work capability assessment. In other words, more people are assumed to be flowing off ESA and on to JSA. That is a key part of our reforms to create a welfare system that encourages people to seek work and reduce costs to the taxpayer. In short, we will stop hiding people who can work in the incapacity statistics. Crucially, in each year, fewer people are expected to be on both of those out-of-work benefits combined than in the June forecasts.
	I can also tell the House that following the spending review the OBR has recalculated its estimate of the reduction in the headcount in the public sector. In June, the OBR forecast a reduction in headcount of 490,000 over the next four years; in its latest forecast, that estimate has come down to 330,000-a reduction of 160,000. The bulk of that revision results from the action that we have taken to cut welfare bills rather than public services. Our difficult choices on child benefit, housing benefit and other benefits, each of which the Labour party opposed, mean that fewer posts will be lost across the public sector. Those headcount reductions that still need to take place will happen over four years, not overnight, and the OBR forecast is that private sector job creation will far outweigh the reduction in public sector employment. Its forecast states:
	"A period of rising total employment alongside falling general government employment is in line with employment trends during the 1990s"
	when total employment increased by 1.3 million over six years while general government employment fell by about 500,000.
	The most important point is this: the lesson of what is happening all around us in Europe is that unless we deal decisively with this record budget deficit, many thousands more jobs will be put at risk in both the private and the public sectors.
	Let me summarise the forecast for the public finances, which shows that Britain is decisively dealing with its debts. Borrowing this year is expected to be £1 billion less than was forecast in June. The OBR forecasts that public sector net borrowing will fall from £148.5 billion this year to just £18 billion in 2015-16. Government debt as a share of GDP is projected to peak just below 70% in 2013-14 and then to fall to 67% by 2015-16, so the debt ratio is now expected to peak at a lower point compared with the June forecast-just below 70% instead of just above it.
	On the OBR's central forecast, we will meet our fiscal mandate to eliminate the structural current budget deficit one year early, in 2014-15. The same is true for our target to get debt falling as a percentage of GDP. Indeed, to use the OBR's own words,
	"the Government has a slightly wider margin for error in meeting the mandate than appeared likely in June."
	For the first time, the OBR has also tested the resilience of the fiscal mandate against two alternative scenarios for the economy that critics have put forward, and in both cases the mandate is met.
	It is clear that our decisive actions have proved to the world that Britain can live within her means. The Government have taken Britain out of the financial danger zone and set our economy on the path to recovery. That is the judgment not only of the OBR, but of the IMF, the OECD, the European Commission, the Bank of England and all the major business organisations in this country. Already, our efforts are paying off. Today's forecasts show that the cost of servicing the Government's debt has come down. Compared to the June forecast, the OBR predicts that we will save £19 billion in interest payments between now and the end of the forecast period. That is £19 billion that will no longer be paid by British taxpayers to private bondholders and foreign Governments. It is £19 billion that would have been wasted, but will instead be saved.
	This is an uncertain world, but the British recovery is on track. Employment is growing, 1 million more jobs are being created and the deficit is set to fall: the plan is working, so we will stick to the course. That is the only way to help confidence to flourish and growth to return, and I urge those who seriously suggest, when they see what is happening to our neighbours across Europe, that we should abandon the decisive plan we are following, and instead borrow and spend more, to think again. What they propose would be disastrous for the British economy, would put us back in the international firing line we have worked so hard to escape from and would mean higher deficits and jobs lost, and we should reject that path.
	Stability is a necessary precondition for growth, but it is not enough. Our economy's competitiveness has been in decline for more than a decade, undermining its ability to create jobs and grow, which is why we have already announced four annual reductions in corporation tax, axed the jobs tax, cut the small companies rate, expanded loan guarantees, simplified health and safety laws, invested in science and apprenticeships and promoted exports through major trade missions.
	Let me set out some of the other things that my right hon. Friend the Secretary of State for Business, Innovation and Skills and I are announcing today to support growth and a rebalancing of our economy. In the Budget, I set out a plan to reduce the main rate of corporation tax to 24%-its lowest ever rate-demonstrating our commitment to tax competitiveness. I can now tell the House that today we are publishing the most significant programme of corporate tax reforms for a generation, for consultation with the business community. We propose to make the UK an even more attractive location for international business and investment by reforming the outdated and complex rules for controlled foreign companies. We have seen a steady stream of companies leaving the UK in recent years, and this Government, unlike the last one, are not content to sit by and watch our competitiveness leach away and our corporate tax base be undermined.
	Another tax issue of crucial importance to our corporate sector is the tax treatment of income from intellectual property. For a long time, we have argued that we should increase the incentives to innovate and develop new products in this country, so to encourage high-tech businesses to invest in the UK and to create high-value jobs here, we can confirm that we will introduce from April 2013 a lower 10% corporate tax rate on profits from newly commercialised patents. We have been consulting the business community, and I can tell the House that as a result of this measure, GlaxoSmithKline will today announce a new £500 million investment programme in the UK, including new manufacturing in Hertfordshire; a £50 million venture capital fund to invest in health care research; a new facility at the university of Nottingham to develop green chemistry technology; and the building of GlaxoSmithKline's next biopharmaceutical plant in this country, with sites in the north of England and Scotland under consideration. In total, it estimates that 1,000 new jobs will be created in the UK over the lifetime of these projects.
	Today, we are also launching a cross-government growth review. This will be a determined, forensic examination of how every part of Government can do more to remove barriers to growth and support growth opportunities. Too often, the natural inclination of Government is in the opposite direction, creating new regulations, putting up new barriers, and making life more difficult for entrepreneurs and innovators. We are starting to turn the super-tanker around. Together with the Department for Business, Innovation and Skills, the Treasury will lead an intensive programme of work, involving all parts of Government, using evidence provided by the business community and reporting by next year's Budget. We will identify reform priorities that can benefit the whole economy. Specific priority will be given to improvements to the planning system and employment law, more support for exporters and inward investment, and reforms to the competition regime. At the same time, we will begin a new sector-by-sector focus on removing barriers to growth and opening up new opportunities. Some of the resulting changes will be substantive on their own; others will help particular industries in specific ways. Some changes may be controversial if they confront vested interest, but brick by brick we will remove the barriers that are holding Britain back.
	Finally, I would like to update the House on the international assistance package for Ireland. I attended the various European meetings in Brussels yesterday. We agreed a three-year package for Ireland worth €85 billion, which is
	"warranted to safeguard financial stability in the euro area and the EU as a whole."
	Of that, €35 billion will be used to support Ireland's banking sector, with €10 billion going towards immediate bank recapitalisation and €50 billion being used for sovereign debt support. Ireland will contribute €17.5 billion towards the total package, and the remaining €67.5 billion will be split, with one third coming from the IMF, one third from the European financial stability mechanism, and one third from bilateral loans and the eurozone facility. The terms of the IMF loans will be determined over the coming weeks. In principle, our bilateral loan is for £3.25 billion, and we will expect the loan to be denominated in sterling. The rate of interest on the loan will be similar to the rates levied by the IMF and the eurozone. The loan to Ireland is in Britain's national interest. It will help one of our closest economic partners manage its way through difficult conditions.
	I should also tell the House that the eurozone Finance Ministers met without me to discuss a permanent financial stability facility. I made it clear in the subsequent ECOFIN meeting that the UK will not be part of that. The president of the euro group made it clear that the UK will not be part of the permanent bail-out mechanism, and that the European financial stability mechanism, which was agreed under the previous Government in May and of which we are part, will cease to exist when that permanent eurozone mechanism is put in place.
	When we came into office, Britain was in the financial danger zone. Our economy was unstable, our public finances out of control, our country- [ Interruption. ]

Mr Speaker: Order. The Chancellor must be heard.

George Osborne: Our economy was unstable, our public finances were out of control and our country was on the international watch list to avoid. We took decisive action. Now, the independent Office for Budget Responsibility has confirmed that the British recovery is on track, our public finances are under control, 1 million jobs are set to be created and our economy is rebalancing. Today we are taking further measures to secure growth and create prosperity. We are doing so based on the foundation of stability that we have now secured. Britain is on the mend, and I commend this statement to the House.

Alan Johnson: Let us move from bombast to reality. Here is what the OBR says:
	"As we discussed in Chapters 3 and 4, past experience and common sense suggest that our central forecasts for both the economy and the public finances are almost certain to be wrong and that there are upside and downside risks to both."
	The only question is on which side of wrong they actually fall.
	This Government have committed our country to a rate of fiscal consolidation that has been attempted only twice in living memory, and on both occasions by countries that benefited from strong growth in a benign global environment. In the current economic crisis, no country other than Ireland has attempted to cut so deeply, so quickly. The Chancellor is always telling us that we have the highest fiscal deficit in the G20. That is not true: the US has a proportionally higher fiscal deficit than ours, and the Americans plan to reduce it by less than half over the next five years. Japan, which has roughly the same level of deficit, has learnt from its experience over the past 10 years and plans to cut by less than a quarter. The Chancellor has chosen to take an unprecedented gamble with people's livelihoods and the country's future, and he has done so on the basis of a fundamental deceit: that when he assumed office, the public finances were worse than expected. The OBR exposed that deceit last year, and it has confirmed it today, so will the Chancellor now tell all those Back Benchers behind him-all those Tories who claim to their constituents that things are worse than they expected, and of course those who tell them that they have never had it so good-that they will have to find a new excuse? Nothing in his statement today can hide the fact that it was the balanced approach of my right hon. Friend the Member for Edinburgh South West (Mr Darling)-[Hon. Members: " Where is he?"] Snowed in, in Scotland, probably. It was the balanced approach of my right hon. Friend that saw growth return at the beginning of the year, saw the recovery gain momentum and led to nearly 1 million fewer people claiming out-of-work benefits than predicted. That was the previous Chancellor, not this one.
	As expected, the OBR has produced a higher growth forecast for this year than at the time of the emergency Budget, but this is the result of an approach that this Government have rejected. The reckless gamble that coalition Members support is still to come; the Chancellor is in the casino, but he has not yet spun the wheel. The OBR's judgment of the future matters more than its revised forecast for a year that is almost over.
	Does the Chancellor accept that the OBR does not expect the fast momentum built up this year to be maintained? Indeed, it is explicit in saying that it expects a slow recovery. Next year, as spending cuts begin to take effect and the VAT hike dampens demand, the OBR is revising its growth forecast down from 2.6% before the emergency budget to 2.3% immediately afterwards and to 2.1% now-it is going south. Looking beyond next year, the forecast for growth over the first four years of the recovery is reduced to an average of 2.4%. This compares with a 3.1% average growth in the far from pain-free recoveries from the two Tory recessions in the 1980s and 1990s. That growth was largely driven by growth in the financial sector and in public services, neither of which will be in a position to help this time.
	Lower growth means fewer jobs, and in this weak recovery the OBR, having changed its mind, is now forecasting something that the Chancellor could not bring himself to say-namely, that unemployment will rise next year. It no wonder that the Conservative-led Local Government Association pointed out last week that front-loading cuts in local authorities will lead to 140,000 job losses next year, which is much higher than originally expected. The Chartered Institute of Personnel and Development estimates that the increase in VAT on 4 January will cost 250,000 jobs, more than three times as many as our proposed increase in national insurance, which the Conservatives called a tax on jobs.
	The Chancellor tells us that public sector jobs will be protected by his decision to cut welfare benefits, but this works both ways: can he tell the House what the additional hit to private sector jobs will be from those welfare changes? For families up and down this country, a jobless recovery will be no recovery at all. This Government have no interest in protecting jobs, no alternative measures if the gamble fails and, worst of all, no plan for jobs. Indeed, since just last week their growth plan has actually shrunk, from a White Paper that was supposed to contain proposals, to today's promise to talk: there will now be a debate, a discussion.
	The Government's plans rely on a huge increase in exports and business investment. Let us hope they materialise. But it is a gamble to assume that cuts on the scale envisaged, with cyclically adjusted public borrowing reduced by 8% of gross domestic product in just five years, will automatically be compensated for by exports. Exports need markets, and there is nothing to suggest that the global economic climate will assist us in achieving the kind of boost to growth that we have not seen for 60 years.
	The Chancellor talked about his plans for corporation tax. Everyone wants a tax system that supports business, but he has abolished investment allowances for manufacturing to pay for a cut in corporation tax that will give a further £1 billion to the banks. Can he tell us what sense there is in helping companies that make large profits for little investment, at the expense of businesses that will invest heavily in the UK? We were very pleased to hear his announcement on GlaxoSmithKline and the patent box. We were pleased because that was our proposal. It was me, as Secretary of State for Health, with the former business Minister, Lord Dyson, who argued for that in Cabinet. That is why it was in last year's pre-Budget report. It is an excellent proposal. It was a Labour proposal.
	Here is an idea for the Star Chamber that the Government are going to form. Why not help UK advanced manufacturing in the civil nuclear supply chain by giving an £80 million loan to Sheffield Forgemasters? That is an idea that they can chew over for the next four months.
	The Chancellor talked about developments relating to Ireland. As I said last week, we support the financial assistance offered to Ireland, but the lessons of Ireland cannot be ignored. As a  Financial Times leader said last week,
	"a slower pace of consolidation might have been its best bet at encouraging growth."
	That is a lesson for us as well.
	The Chancellor's analytical ability in respect of Ireland was demonstrated in his 2006 article, which has been widely quoted, but in 2008, just two years ago, confident that Ireland would not be affected by the financial crisis that was just emerging, he said that Ireland now had
	"a 'future fund' of assets built to provide security against future shocks and liabilities. Their public finances are well placed. Their competitiveness has risen. Their institutions are stronger."
	Ireland had
	"used the fat years to prepare for the lean years."
	The Chancellor was wrong about Ireland, and he is wrong about the United Kingdom. The autumn statement does nothing to alleviate the summer madness that led him to gamble so recklessly with our future.

George Osborne: I think the shadow Chancellor made the mistake of writing his response before he had seen the OBR's forecast. He predicated all of it on there somehow being lower growth, when in fact growth is higher in every quarter and every year than was predicted in the June forecast. I assume that he also wrote his response before the European Commission produced its forecast today. I am sure that he has now seen it. He read out a list of countries, but the European Commission predicts that over the next two years we will grow more quickly than Germany, France, the United States of America, Japan, the eurozone and the EU average. If one is going to read out a list of countries, one might as well start with the most accurate and recent forecast for their economies.
	As I have said, the shadow Chancellor's response was not much of an analysis of what the OBR has said today. He skated over the fact that because of the welfare changes that we have introduced, we have been able to reduce the public sector headcount reduction that is required by any deficit reduction plan-including, presumably, the plan that he will one day propose. He should at least acknowledge that the welfare changes achieve that. He and the leader of his party have some important choices to make in the next few months as we vote on some of these measures. They must decide whether they will support welfare reform or would rather see a higher number of public sector job losses, but that will be a decision for them.
	The shadow Chancellor said that he did not believe in the rebalancing of the economy, and that the assumptions for exports and investment that I had made were fanciful. They are, of course, the estimates made by this independent body, the appointment of whose members, as I have said, was ratified by the Treasury Committee. The shadow Chancellor accused me of having no alternative measures to present. I thought that that was a bit of a cheek, because as far as I can tell the Labour party has a blank sheet of paper as its new economic policy. He talked of the importance of protecting intellectual property and supporting the growth of patents, and then praised, I believe, James Dyson. The last time I checked, it was we, rather than the shadow Chancellor, who had consulted him, but so be it.

Alan Johnson: Lord Drayson.

George Osborne: Ah. Well, I am sure that Lord Drayson also had some interesting things to say.  [Interruption.] I welcome, by the way- [Interruption.]

Mr Speaker: Order. Members really must calm down. Only this morning I was talking to sixth-formers, one of whom observed that the noise in the Chamber was totally off-putting. The public loathe it, and so do I. Let us put an end to it.

George Osborne: I welcome the support that the Opposition have given to our decision to offer a bilateral loan to Ireland. We will have to put legislation before the House, and I will of course keep the shadow Chancellor informed of the details when they are negotiated along with the IMF, eurozone and other bilateral contributions. I should have mentioned that Sweden and Denmark have also provided bilateral loans.
	I come back, however, to the point that this forecast shows 1 million new jobs being created over the next four or five years. It also shows growth of over 2% in each year; it shows the economy rebalancing; it shows Britain getting to grips with its debts. Yet all the shadow Chancellor could come up with was this: he said he had read a  Financial Times editorial in the last week-and I note from his interview this morning that that is how he does his homework; he says he photocopies articles from the FT. Well, I went one better and actually got a copy of the FT, and he said this in his FT interview this morning:
	"I am a great believer in the philosophy that if you've not got anything to say, keep your mouth shut".
	Very good.

Mr Speaker: A lot of Back Benchers want to say something and I would like to accommodate them, but there is important business to follow in the form of Backbench-led debates, so brevity is of the essence from the Back Benches and the Front Benches alike.

Andrew Tyrie: In June, the Red Book was forecasting that the savings ratio would remain broadly steady at about 6% for the next five years, which is quite near its long-run average for the previous 40 years. On page 67 of the most recent document however, the new forecast assumes a fall in the savings ratio to just over half that, and for the remainder of the Parliament, at only 3%. Is the Chancellor worried about that fall in the savings ratio, and will he consider measures to address it?

George Osborne: Yes, I have, of course, seen the forecast for the savings ratio and we will want to address it. It has the savings ratio returning to its average of before the recession, and I think all parties in this House, and certainly the Government, will want to find ways of encouraging saving more effectively than was the case in the past, and to address that particular problem.

Margaret Hodge: What is the forecast for the gap between the richest and the poorest in Britain by 2015? Do the Chancellor and the OBR expect it to grow?

George Osborne: I am not aware that the OBR makes that forecast, but obviously everything we are doing-whether increasing free nursery care provision for some of the poorest two-year-olds or introducing the pupil premium-is designed to encourage social mobility and to give those on lower incomes a chance to increase their incomes over this Parliament.

John Redwood: I thank the Chancellor for the guarantee of no bail-outs for other European countries. Does he think the European Central Bank will make available all liquidity needed by major banks in euroland, as it should do because it tells us they are all solvent?

George Osborne: Obviously, the ECB is independent so I will not speak for it. What I have said about the European financial stability mechanism is that we now have a verbal agreement-I will, of course, want to secure it over the coming weeks-that that mechanism will not form a permanent part of the bail-out mechanism that the eurozone wants to put in place from 2013, and we will not be part of that bail-out mechanism. Indeed, if it requires a treaty change, our consent to that change would, of course, be required.

Ian Paisley Jnr: I thank the Chancellor for his statement. What assurances has he received from Ireland to ensure the multibillion pound loan now given to it will not be allowed to be used to have a fire sale of assets that the Irish state now owns in Ulster and, indeed, across the whole of the United Kingdom? Can the Chancellor also tell us what progress he has made with the Northern Ireland Executive on a reduction in corporation tax so we can compete fairly with a nation that has a corporation tax rate of 12.5%?

George Osborne: The Irish bank restructuring package will now take several weeks-at least-to put in place, and we are, of course, very aware of the interconnectedness of the banking systems of Ireland and Northern Ireland, and, indeed, the whole UK. That is one of the reasons why we are making this bilateral contribution; it is one of the reasons why we are in the room discussing the conditions and the banking package. I am certainly conscious of the fact that some of the Irish banks have significant assets in the UK, and we have a very real interest in the future of that. That is why my hon. Friend the Financial Secretary came to Northern Ireland earlier this week, and I want to make sure that the Treasury, as well as the Secretary of State for Northern Ireland of course, remain in very close contact with the Northern Ireland Executive and Members from Northern Ireland.
	Corporation tax has genuinely been a matter of debate in the European Union. I do not think that has been any secret; it has been in the newspapers. Some member states wanted to attach conditions to Ireland's corporation tax rate, and I do not deny that that 12.5% rate is a real challenge for companies in Northern Ireland. That is why the Secretary of State for Northern Ireland is looking at that and at packages to help the competitiveness of companies in Northern Ireland. But I took a position, which was that it is not really for other member states to dictate the tax rates of sovereign nations, even when they are seeking international assistance. The rates of tax levied by the Irish Government should be a matter for the Irish Government and the Irish Parliament. If the shoe was on the other foot, we would not want to be accepting, in this country, decisions imposed on this Parliament about tax rates. This should be a matter for the elected Parliament of the country. I do not deny that that 12.5% rate is a challenge for Northern Ireland, but I did not feel it was right to use the position we found ourselves in to get Ireland to increase that corporate tax rate.

John Pugh: The Chancellor says he is intent on reforming our "outdated and complex rules for controlled foreign companies." Can he assure me that this will not create new opportunities for tax avoidance?

George Osborne: Yes, I can assure the hon. Gentleman that that is certainly not the purpose of the measure and that tax avoidance is what we are going to seek to avoid. The measure is there to keep pace with the changes in corporate tax regimes that have been introduced in many other countries, not only Ireland, which we have just been talking about, but countries such as Belgium and the Netherlands, which have also made corporate tax changes that attract international companies to headquarter there, rather than in the UK. We have to keep pace with those changes, which is why we are taking the measures that we are.

George Mudie: The Chancellor and the Business Secretary have apparently postponed the long-awaited growth White Paper. Officials say that this is because of the lack of serious content. Can the Chancellor tell us when can expect this long-awaited document? In which financial year?

George Osborne: What we have published today is a series of documents, which the hon. Gentleman has perhaps not had a chance to see yet. Some of them are on corporate tax reform, on intellectual property and on how in time for the Budget-after all, a White Paper proposes measures that will then be legislated for-we will have measures that will address the competitiveness of British industry. Our measures will specifically look at things such as the competition regime, the approach we take to attracting inward investment, how we improve our employment law and specific sectors. If he wants to involve himself in that process, I will make sure he can be part of it.

Michael Fallon: Given the forecasting record of the Chancellor's predecessor but one, who was frequently in error but seldom in doubt, is not the strength of these forecasts that they were prepared by independent officials, who cannot be and were not overruled by politicians?

George Osborne: That is, of course, a very significant feature of what is happening today. It is completely unprecedented for a Chancellor to present an autumn forecast that has been produced independently by people who have been verified by the all-party Treasury Committee and who had their own separate press conference. In addition, Members have had a couple of hours to look at this document. If one thinks back, for example, to a year ago and the pre-Budget report, when the previous Chancellor produced the autumn forecast, one recalls that he rattled off the numbers. There was absolutely no opportunity for the shadow Chancellor to have examined those numbers or to have looked at the document, or for any other Member in the House to have done so. It was the Chancellor's judgment, rather than an independent judgment. Our approach is a major improvement to fiscal policy making in this country. The legislation is before the House of Lords, and I hope that when it comes to the House of Commons it will have all-party support.

Dennis Skinner: Why are the Irish banks worth saving yet Northern Rock was not?

George Osborne: What the Irish banks are getting, in many cases, is a capital injection. As in the UK, the banks have been very poorly regulated. We are improving our regulation system. If the hon. Gentleman does not think we should be supporting the Irish banking system, the impact of his proposals on his constituents in Derbyshire would be very severe.

Dan Byles: The shadow Chancellor says that he is concerned about what he calls slow growth in coming years. Does the Chancellor agree that steady, sustainable and private sector-led growth is exactly what the UK needs after the bubble that was inflated and then burst by the previous Government?

George Osborne: My hon. Friend makes an extremely good point. What is happening here is a rebalancing of the economy. I hear the shadow Chancellor muttering away about what he calls slow growth, but according to the European Commission forecasts today our growth is more rapid than that of Germany, France, the United States of America or Japan, as well as than the EU average and the eurozone average. I am not sure what his proposals are to increase that growth rate but if he has some, now is the time to produce them.

Dave Watts: Is it not the case that most of the public sector cuts will take place in the north and that any jobs that are created-there are not likely to be many-will be in the south? Is not the policy unbalanced?

George Osborne: In the last decade, under the Government of which the hon. Gentleman was a member, for every 10 jobs created in the south-east only one was created in the midlands and the north. That is the situation that we have inherited and the economic model that we have to change. It is precisely because we want to see exports and investment increase that we are aiming for a more geographically balanced model of economic growth. Announcements such as the one we have made today on the investments by Glaxo will help that, as will the first-time-ever tax cut for new employees that is specifically directed at regions outside the south-east.

John Baron: I suggest that my right hon. Friend never tire of reminding the Opposition that this recession, unlike all previous post-war recessions, is a recession built on debt and that one cannot borrow one's way out of debt.

George Osborne: I assure my hon. Friend that I will not tire of reminding the Opposition of that. Of course, if they come forward with a new economic policy we can examine it, but at the moment there is not a new economic policy to examine, so there we have it.

Chuka Umunna: The Chancellor has said that he sees private sector growth being driven by business investment and by exports. In its report today, the OBR has revised down its forecast for business investment in four of the years between 2010 and 2015. Of course, we have seen the dramatic uncertainties in the eurozone, which is our main export market. If exports and business investment do not turn out to be what he expects, where does he see private sector growth coming from?

George Osborne: One of the primary tasks of the OBR is to assess whether we will hit the fiscal mandate. The very fact that the fiscal forecasts are not a matter of controversy in the House today shows what we have done to get the British public finances under control. The OBR assessed specifically the scenario that the hon. Gentleman volunteers and said that the fiscal mandate will be met under those conditions. In fact, rather perversely, that helps the fiscal forecasts because of the tax base being more focused towards consumption.

Charles Walker: When the books are balanced, will the Chancellor seriously consider reducing the overall burden of taxation? Thanks to the efforts of the previous Government, it is far too high.

George Osborne: Of course, I am a believer in trying to reduce the tax burden and trying to reduce taxes. However, I have always believed that the best way to achieve that is from stable public finances, otherwise one cuts taxes one year and has to put them up the next. So I am a fiscal conservative with a small c as well as a tax-cutting Conservative with a big C.

Andrew Love: In reference to the answer to my hon. Friend the Member for Streatham (Mr Umunna), the Chancellor, through the OBR, is suggesting that there will be 8% growth in business investment yet there is scant sign of it at present? Net trade, it has been suggested, will increase by 6% in each of the next four years yet, according to the Governor of the Bank of England, there are doubts about whether the euro area or the United States will deliver the sort of export growth that is being suggested. Is not the Chancellor just a little worried about the optimism in the estimates and is he concerned about whether they will be delivered over the next four years?

George Osborne: The hon. Gentleman says that I made the forecasts, but they are independent forecasts by Mr Robert Chote, whom I do not think anyone would claim is in anyone's pocket. He is totally independent. The hon. Gentleman is on the Treasury Committee, which interviewed Mr Chote for the job and passed him. These are Mr Chote's, Mr Nickell's and Mr Parker's estimates and they have made a central forecast. He says that there is scant evidence, but that is not what the Office for Budget Responsibility believes. It is independent and it has forecast that business investment is set to grow by more than 8% for each of the next four years and that exports are set to grow by an average of more than 6% a year.

Andrea Leadsom: Is my right hon. Friend concerned that in the Greece bail-out and now in the Ireland bail-out taxpayers will end up supporting professional bond and equity holders in banks?

George Osborne: This has been one of the most difficult issues that the international community and, of course, the Irish people have had to wrestle with. For reasons of financial and economic stability, it was decided that it was not possible and would not be sensible to ask the senior debt holders in the Irish banks to take a haircut. That is exactly what did happen in late 2008, in some of the US bank rescues, with pretty disastrous effects, so that is why that decision was taken. Subordinate debt holders in the Irish banks will suffer losses and I think that is appropriate.

Sheila Gilmore: Given that the nearest year for prediction in the OBR report suggests that growth will fall in relation to previous predictions-it was 2.6%, then 2.3% and is now 2.1%-what confidence can we have that predictions further out than now will be any more reliable? Is it not likely that growth will not rise as much as predicted?

George Osborne: I said right at the beginning of my remarks that these are economic forecasts and that we should treat them with the caution with which one should treat all economic forecasts. At least we explicitly acknowledge that and the forecasts are independently produced. What we have here is a central forecast; previously, Chancellors just gave a number and asserted that that was the forecast come hell or high water. That is not what the OBR is doing today. However, one can take confidence that its growth forecast for next year is in line with those of most independent commentators and forecasters. It happens to be very close to the numbers that the European Commission produced today, which were not available to the OBR or the British Government until today. We can have confidence that it is part of a group of people who look to the UK and see it growing sustainably over coming years and jobs being created.

Edward Leigh: All the talk is of cuts, but with spending still rising despite these so-called cuts and with debt as a proportion of GDP rising to a staggering 70%, will my right hon. Friend remind the House that, to coin a phrase, there is no alternative to further massive efficiency savings, particularly in ring-fenced Departments such as Health where there has been a catastrophic decline in productivity in the last 10 years?

George Osborne: I certainly agree with my hon. Friend that an essential part of this programme for public expenditure is getting greater productivity in the public services. As the former Chair of the Public Accounts Committee, he has much to offer. The Treasury is engaging with him on this, I hope, and will engage further with him in the coming months. He is absolutely right that, in a period when there is less money available, if we do not have reform, we will have deterioration in the service. That is why we have got to have reforms and why Parliament is being asked to support those reforms in the next few months.

Barry Gardiner: The OBR's central forecast is for a "relatively sluggish medium-term outlook", which it says
	"reflects...the impact of the Government's fiscal consolidation."
	Can the Chancellor confirm that it follows from this that if the Government's fiscal consolidation had been less severe, the medium-term outlook would be less sluggish? In other words, he has cut too far and too fast, just as Ireland has.

George Osborne: The short answer is no. We inherited a situation of very deep recession, a major banking crisis and a record fiscal deficit. I thought-although one is never sure-it was common ground across the parties that at least we had to do something to address the fiscal deficit, not that we have heard specific measures from the Opposition for doing that. In the summer, the OBR produced a comparison of the growth forecasts under the previous Government's plans and under the plans of the current Government, which showed that over a period of time we were putting forward a much more sustainable path for growth that would lead to higher growth in the future. It also avoids the downside risk-the tail risk-of a major fiscal event, which would be a major loss of confidence in the UK. It is pretty remarkable that here we are today debating the numbers, and that is fine, but we are not having to worry about the UK's creditworthiness, unlike some other countries in the European Union, even though we inherited the largest budget deficit in the EU. We have taken measures to take ourselves out of that firing line, and now we have sustainable growth and jobs are being created.

Matthew Hancock: Will the Chancellor give us his assessment of what would happen if we ignored the advice of the IMF, the OECD and the EU, and moved from the path of putting our own house in order?

George Osborne: It is not a bad test of the policy offered to the Government from the Opposition to consider what would happen if we actually did it tomorrow. If the shadow Chancellor stood up tomorrow, or if I adopted his plan, and announced that the UK was backing off its fiscal consolidation plan and that it would take much longer, where do we actually think the UK would be within about 30 minutes of that statement?

Kate Green: I am naturally pleased that the number of job losses in the public sector has been revised downwards, but I am very concerned that it seems that the £18 billion of welfare cuts, which will affect the poorest, will be picking up the price tag. Was that the Chancellor's explicit decision and policy, and if so does he think it was fair?

George Osborne: I do of course think the spending review was fair, but as I said at the time- [ Interruption. ] If the Opposition would actually produce a spending review, perhaps we could compare the two-but they do not want to do that.
	The point I was making to the hon. Lady is that I said at the time of the Budget and the spending review that I was making a conscious decision to seek further welfare reform to try to reduce the rapidly escalating costs of the welfare state. That was a challenge that anyone doing my job would face, and I said that if we were able to find further welfare reforms, we would be able to reduce the cuts in Departments, and that is exactly what we were able to do.

Jesse Norman: May I congratulate the Office for Budgetary Responsibility on a thoroughly transparent, comprehensive and technically excellent report? It marks a first in this country. Can the Chancellor give us an assessment of any remaining threats he sees to financial stability from the eurozone countries?

George Osborne: There is of course concern about the high deficits, particularly in the eurozone. Let us hope that the action taken yesterday to stabilise Ireland, and also the clarification that eurozone Ministers offered about the future permanent bail-out mechanism and the involvement of private sector creditors in that, will help to achieve stability. That is certainly what the intention was yesterday.

Ann Coffey: Stockport council will tonight announce proposals for cuts, with the likely loss of 400 jobs. That will have a devastating impact on my constituents who are affected, but it will also lead to loss of confidence by those with jobs that they will have jobs in the future, which might lead to reluctance on their part to spend money in the economy. Is the Chancellor concerned that such lack of confidence will affect new jobs and future growth?

George Osborne: Of course, I have enormous sympathy with anyone who faces a job loss, but we are creating the economic conditions where they will be able to find a new job, I hope. There is support from the welfare system. We expect more than 1 million new jobs to be created over the coming years. I make this observation to the hon. Lady, who was Parliamentary Private Secretary to the previous Chancellor: if the Labour Government had been re-elected in May, they would be cutting billions and billions of pounds from public spending, this year, next year and in the years ahead. That was in the March Budget plans, even if they are not the plans that the shadow Chancellor is sticking to. If the hon. Lady is able to find a way of cutting many, many billions of pounds-£40-odd billion-from public spending without in any way affecting the local government settlement, she should please let me know.

Marcus Jones: I welcome my right hon. Friend's statement and his will to reform business regulation. In the course of that reform, will the onerous and costly reporting to Government culture to which businesses must adhere be fully scrutinised?

George Osborne: The short answer to my hon. Friend is yes. One of the specific aspects that we want to look at is how Government should be helping businesses grow, rather than standing in the way of that. That includes procurement for Government. The Government spend too much of their money on the largest companies in the country and not enough on some of the smaller companies. That is one of the things that we seek to improve.

Barbara Keeley: On public sector jobs, the Chancellor says that head count reduction will happen over four years, but as he knows, some local authorities are facing budget reductions of 20 or 30% next year alone, due to front loading and loss of specific grant. Will he consider rephasing the cuts to local government so that we do not see 140,000 local government job losses next year?

George Osborne: I said at the time that it was a challenging settlement. I have removed some of the ring-fencing-indeed, almost all the ring-fencing-to allow local authorities the maximum flexibility to deal with that, but unfortunately I inherited a situation where the country was borrowing £1 in every £4 that it was spending. At a time when people are looking at European countries, we can see what happens to European countries that have high budget deficits and no credible plan to deal with them, so I have had to take those decisions. As I say, if the Labour party wants to put forward a plan to remove the structural deficit without affecting the local government settlement, let us hear it.

Therese Coffey: I warmly welcome the announcement that you made of the investment by GSK into our British economy today on the back of the 10% tax rate for patents and innovation. Can you tell us more about the competitiveness measures that you are taking to help this country on its way out of the mess left behind by the Opposition?

Mr Speaker: Order. May I make the point that I have made no announcement and I can certainly say no more, but I think the Chancellor can oblige? We know what the hon. Lady meant.

George Osborne: We are looking at two specific things. One is the controlled foreign companies regime. This is what we believe will help encourage large multinationals to choose the UK as a place to put their headquarters, rather than in Holland or Belgium, for example, where some companies have chosen to go. In a world in which companies can increasingly choose where to locate and countries are being aggressive in trying to attract their location, these tax measures will make us one of the most competitive places in the world for a company to locate its headquarters. On the patent box and the lower corporation tax rate for intellectual property, of course the GSK announcement is just one of many, I hope, from companies that depend on intellectual property and patents to power their business. Again, that will make us very competitive versus other countries.

Michael McCann: The OBR confirmed today that we will borrow £1 billion less. Last week, we decided to make a £7 billion loan to the Republic of Ireland, yet apparently we could not afford to make an £80 million loan to Sheffield Forgemasters. Is that not proof, if any were required, that the Chancellor has deliberately talked down the British economy and, more importantly, that these policies are damaging the British economy?

George Osborne: I think that is one that was prepared earlier. UK growth is forecast to be higher than that of Germany, France, many other European countries or the United States of America. It is also the case that the OBR is forecasting the creation of a million jobs. When it comes to the sovereign loan to Ireland, that is of a totally different nature from industrial support. It will be set out in the terms that I bring before the House of Commons. It is £3.25 billion, rather than the number that the hon. Gentleman gave.

Geoffrey Clifton-Brown: My right hon. Friend has today reinforced the need for exports to help our recovery. What can he personally do to help reverse the situation whereby we export more to southern Ireland than we do to all the BRIC countries-Brazil, Russia, India and China-put together?

George Osborne: Since the Government were created there has been an absolute focus in foreign policy and trade policy on trying to increase our exports to those BRIC countries. The Prime Minister led major trade missions to India and China, the Business Secretary was very recently in Russia and I think that a trip is being proposed for Brazil, so we are seeking to expand our exports to the BRIC countries and, indeed, to some other important emerging economies such as Indonesia, Turkey and so on. We do not want to export less to southern Ireland or to anyone else in the advanced world; we just want to increase our exports to emerging economies.

Geraint Davies: We know that the deficit is the price that has been paid to avoid a depression-a price that the Chancellor would not have paid. To reduce the deficit, will he consider using three methods: first and foremost, a proper jobs and growth strategy; secondly, fair and progressive taxation; and, thirdly, savings over a greater period, instead of simply casting half a million public sector workers on to the dole, triggering the unemployment of another 1 million private sector workers and ending up with the unfair, unnecessary and failed policies of the Conservative past?

George Osborne: That was a complete load of nonsense. The independent forecast shows that we are projected to create 1 million jobs, and that the economy will grow more quickly over the next couple of years than the economies of most of our European competitors. Frankly, we inherited from the previous Government an absolutely catastrophic situation in which people called into question Britain's ability to pay its way in the world. That was the situation we inherited, but I think we have done many things in the past six months to ensure that the British economy is now on the mend.

Claire Perry: I am sure the whole House will welcome chart 1.1 on page 8, which shows that there is almost no probability of a double-dip recession. Does the Chancellor agree with that forecast?

George Osborne: It is of course an independent forecast, and although the Chancellor does-and will under legislation-have the right to disagree with it, I have not exercised that right today.

Chris Williamson: What words of comfort can the Chancellor offer the construction industry and the thousands of unemployed building workers who are still reeling from his Government's decision to scrap the Building Schools for the Future programme and end housing targets? Does he not accept that a private sector-led recovery will be impossible without a vibrant construction industry? What will he do to support the industry?

George Osborne: We certainly want to support the construction industry. It is one of the specific sectors that we are looking at, as the growth review that we publish today sets out. If I can just correct the hon. Gentleman, however, I must say that the capital investment programmes of this Government are actually higher than the capital investment programmes set out in the March Budget. If he is not aware of what the Labour party fought the election on, so be it.

Mel Stride: I welcome my right hon. Friend's statement and, in particular, today's OBR forecast, which sees projected public sector job losses drop from 490,000 to 330,000. Based on the previous 490,000 figure, PricewaterhouseCoopers projected that half a million jobs would be lost in the private sector. Will my right hon. Friend comment on the likely reduced impact on private sector unemployment as a result of today's lower projected job losses in the public sector?

George Osborne: The OBR also makes a projection for private sector employment and takes into account all the potential impacts on that, and it finds that a net 1.1 million jobs will be created over the period: there will be 30 million people in employment at the end of this Parliament, compared with 29 million today.

Jonathan Edwards: In bringing forward their national insurance proposals the Government accept that their fiscal consolidation programme will have a disproportionate affect on those areas of the state that are more reliant on public expenditure. What other countervailing measures is the right hon. Gentleman considering?

George Osborne: We have created the regional growth fund to look specifically at areas that need support and investment. We have been able to announce some significant transport investment in other parts of our country. The national insurance tax reduction, which the hon. Gentleman mentions, refers explicitly and only to job creation outside the south-east and east, and I have deliberately taken that decision to try to create a more geographically balanced economy than the one I found when I took this job.

Tobias Ellwood: It is clear from the response that we have heard today that the Labour party is still in denial about the huge deficit that it created. I congratulate my right hon. Friend on coming up with a workable, viable and transparent plan that can take us out of this mess.
	I take my right hon. Friend back to the permanent fiscal stability facility, which will not come online until 2013. What will happen if another eurozone country requires a bail-out? Will Britain's involvement be kept to a minimum?

George Osborne: I thank my hon. Friend for his initial comments. I say this about any future action that we may or may not have to take. On the bilateral loan, I said last week that there were some very specific- I stress the words "very specific"-circumstances that would lead us to support Ireland because of the interconnectedness of our economies. I also said that the European financial stability mechanism, the EU fund, was something that the previous Government had signed up to, and that the UK could not block its use because it operated under qualified majority voting. I had to deal with that situation, but by finding now what I think is a way forward that means that the mechanism disappears in 2013, we have taken a bad situation and made it a lot better.

Gregg McClymont: Has Ireland's fiscal consolidation been successful?

George Osborne: The point that I would make- [Interruption.] Ireland has had to take some incredibly difficult decisions to deal with its fiscal deficit. Its Government have announced, with the support of all the major parties in Ireland, with the exception of Sinn Fein, that they are going to have to take further austerity measures next year and over the next three or four years. If they did not take those measures, the country's situation would be even more difficult.
	Frankly, we should have some respect for the incredibly difficult situation in which Ireland finds itself. We should take some comfort that, because of the measures that we have taken on our public finances, we in this House are able to help the country and that we are not in the firing line in the way that we would have been if the Labour party had won the election.

David Rutley: Despite the excessive nay-saying from the Labour party, is the Chancellor aware of a recent report from Barclays bank that outlined that the majority of businesses in the north-west-our region-are looking to expand in the year ahead? Will he tell the House what steps he is taking to support small and medium-sized enterprises, which, in the years ahead, will be the growth engine for job creation?

George Osborne: We avoided the increase in the small companies rate that the previous Government wanted to introduce even in a recovery. We have been able to avoid the damaging part of the jobs tax. Of course, my hon. Friend is absolutely right. The forecast in this report and the forecast from many other people is for jobs to be created in the private sector across the country, including in the north-west-a part of the country that both of us represent in the House. Frankly, one can see again today that the Labour party wants to talk down the economy, does not believe independent forecasts and talks down the regions. It is no wonder that people rejected it at the election.

Bill Esterson: Was the Chancellor talking a "complete load of nonsense", as he put it earlier, when he said
	"Look and learn from across the Irish Sea...What has caused this Irish miracle, and how can we in Britain emulate it?"
	Does he recognise that a private sector recovery has not happened in Ireland? Why should following the same policies be any different here?

George Osborne: If the hon. Gentleman cannot tell the difference between the economic situations in which Britain and Ireland find themselves today perhaps he should not turn up to these events.
	I just make this observation. This is an independent report, produced by Robert Chote.  [Interruption.] I have had a lot of chuntering from Opposition Front Benchers about the independence of the Office for Budget Responsibility. We set it up on an independent basis and we have given all members of the Treasury Committee the right to approve or reject the members of the budget responsibility committee. We will see whether Opposition Members, including Front Benchers, support this legislation when it comes before Parliament. At the moment, it does not sound as if they will support it, but perhaps they will change their minds.

David Nuttall: Is my right hon. Friend as concerned as I am that over-prescriptive regulation such as that proposed by the Financial Services Authority's retail distribution review may result in a loss of jobs?

George Osborne: I know that a number of concerns have been raised about the FSA's review of that area. Obviously, it is an independent regulator, but I have made sure that those concerns have been drawn to its attention.

Karl Turner: Does this apparent good news mean that the Government can now spare the blushes of the disgraced Deputy Prime Minister and of Government Members by scrapping plans to hike university tuition fees, or is this really about pure ideology-rich kids can afford to go to university and poor kids cannot?

George Osborne: I will tell the hon. Gentleman what this issue is about: the hypocrisy of the Labour party. Labour Members set up Lord Browne's report, and the shadow Chancellor was in the Cabinet that agreed to that. Lord Browne has reported, and now they are all walking away from it-it is absolutely pathetic.

Rob Wilson: Compared with June, the OBR predicts, in table 4.21 on page 118, that we will save £19 billion in interest payments. Contrary to what the shadow Chancellor said, are not the choices made by my right hon. Friend the right ones to ensure that we have this £19 billion to spend on schools and hospitals rather than putting it in the pockets of foreign Governments and private bondholders?

George Osborne: My hon. Friend is absolutely right. This is one of those issues that is perhaps less commented on, but very relevant. We are reducing the debt interest payments that we inherited from Labour, and the debt interest bill-the money that we have to pay out to private bondholders and foreign Governments to borrow-is coming down from the number that we inherited. That is £19 billion that would otherwise, if we followed the Labour party's plans, be being paid to foreign Governments and private bondholders. That is how Labour Members want taxpayers' money spent; we have other plans for it.

Mark Reckless: Instead of lending to Ireland to repay the European Central Bank and bolster bank capital relative to large impaired assets, might it not make more sense to help Ireland to de-leverage by buying some of those written-down assets directly, particularly where they are in the UK and are not well managed by the National Asset Management Agency?

George Osborne: The support for Ireland had to be a co-ordinated international effort with the IMF and other European member states, and we have taken our part in that. I do not think that coming up with our own unilateral package would have been particularly easy when, as I said, the IMF was organising this international effort. I have already said in reply to an earlier question that of course we will want to look at the impact of the banking reorganisation in Ireland on some of the assets that are managed in the UK, and I will keep the House informed about that.

Jessica Lee: I welcome my right hon. Friend's statement, particularly on the investment of GlaxoSmithKline in a new facility at the university of Nottingham near Erewash. Does he agree that ring-fencing the science budget, bolstered by his coming to this House today and presenting figures of growth and stability for the UK economy, sends out a clear message to the rest of the world that the UK, particularly the east midlands, is an excellent place in which to invest and build?

George Osborne: I completely agree with my hon. Friend, who has been a powerful champion of the east midlands and of her constituency in the few months since her election. I know that she will welcome the announcement by Glaxo, which is because of the decisions that we have taken. Of course, the support for job creation in the east midlands and across the country would not be there if we had a fundamentally unstable economy of the kind that this Government inherited in May.

Justin Tomlinson: What measures are being taken to maintain the low interest rates that are essential to mortgage holders in my constituency?

George Osborne: The Bank of England Monetary Policy Committee sets interests rates, and does so independently. The purpose, in part, of the measures that we have taken to reduce the deficit is to give the Monetary Policy Committee the maximum possible flexibility and freedom in setting the appropriate monetary policy to stimulate demand in the economy. I believe that that has enabled it to keep interest rates low, which helps to stimulate the economy.

Charlie Elphicke: Will the Chancellor confirm that the corporation tax reforms that were announced today will make the UK more attractive as a holding company jurisdiction and help to make the UK a pre-eminent corporate headquarters centre, as much as a financial centre?

George Osborne: My hon. Friend is absolutely right that the reforms will help to do that. They will help the UK to be an attractive place for international companies to locate, invest and create jobs. The changes to the patent regime will help a number of sectors, such as pharmaceuticals. I mentioned GlaxoSmithKline, but of course Pfizer is a big employer near Dover, and I hope that it, too, will benefit from the announcements that we have made.

Chris Ruane: rose-

Mr Speaker: Order. Was the hon. Gentleman present at the start of the statement?

Chris Ruane: I was.

Mr Speaker: He was uncharacteristically quiet throughout it.

Chris Ruane: I was right here at the back, Mr Speaker.
	In my constituency, 46% of the workers are in the public sector. In one Edinburgh seat, the figure is 66%. Those are huge numbers of public sector workers and many of them will be laid off. What additional help can the Chancellor give to constituencies that contain large numbers of public sector workers?

George Osborne: First, we are seeking to reduce the impact of the fiscal consolidation that would have taken place under either the Conservative or the Labour party in office. We are doing so in a way that, as the OBR has today shown, has a reduced impact on public sector headcount loss. Secondly, we are putting in place a comprehensive Work programme to help people who are without work to find work. Thirdly, today's forecast is that more than 1 million new jobs will be created over this Parliament. That will help all constituencies, including the hon. Gentleman's.

Points of Order

Keith Vaz: On a point of order, Mr Speaker. I seek your guidance on a potential issue of contempt. Last Friday, the Clerk of the Home Affairs Committee was contacted by the Press Association to inform him that it was in possession of a recording of a private session of the Committee in which one of our reports was discussed. On Tuesday, we held a public session before going into private session and the live feed remained on, due to a technical problem in Committee Room 5. To its credit, the Press Association agreed not to publish or broadcast the Committee's deliberations, but instead reported the fact that the feed had remained open. When such a matter occurs, is a news organisation able to broadcast a private session of a Committee, or is that regarded as a contempt? We assumed that it was a contempt, but, as I said, the PA did not broadcast what we said. It would be good to receive clarification on that matter and to hear whether there might be an investigation into the technical matters in Committee Room 5 to ensure that it does not happen again.

Mr Speaker: I am grateful to the right hon. Gentleman for his point of order and for giving me advance notice of it. I understand from the advance notification and from what he has just said that there was a technical problem with the recording of his Committee's meeting last week. There is not really a procedural solution that I can offer him or the House, but I am advised that all necessary steps are being taken to avoid a recurrence. If no harm was done, I am sure that the Committee and its illustrious Chairman will be relieved. In essence, he asked me a hypothetical question-whether it would have been a contempt, and so on and so forth. I think that he is capable of working out such matters for himself. On this occasion, I hope that he will understand it if I adopt the approach of the late Lord Whitelaw, which was that on the whole, judging from experience, he preferred to cross a bridge only when he came to it.

Stella Creasy: On a point of order, Mr Speaker. I wish to ask for your help as a new MP baffled by the actions of Government Departments that may wish to avoid scrutiny in this place.
	My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) and I tabled questions for today's Culture, Media and Sport Question Time on the impact on participation in sport of the proposed abolition of school sport partnerships, which were accepted by the Table Office and drawn in the ballot for answer. Subsequently, the DCMS summarily moved them to other Departments for answer, and having seen today's Question Time, we may understand why it chose to avoid them. Could you help me understand how that occurred, and would it be possible to look at the current procedures to help prevent Ministers from using them to park matters that they are too embarrassed to deal with, and indeed from further diluting scrutiny of their actions by making such questions eligible only for a written answer?

Mr Speaker: I thank the hon. Lady for her point of order. That is a very unfortunate sequence of events, and I am afraid that there are really only two points that I can make to her today. First, the decision as to whether to transfer an oral question from one Department to another is exclusively a matter for the Government. It is not a matter for, for example, the Chair.
	Secondly, as I have had reason to state on several previous occasions, I strongly deprecate the practice of late transfer of oral questions by Government Departments. It could have been done earlier. It is very unseemly and very discourteous to Members, and whatever the motivation behind it, it will inevitably fuel the type of suspicion that the hon. Lady has eloquently articulated this afternoon. I am pleased that the Deputy Leader of the House is on the Treasury Bench and will have heard that point. I hope that it will not be necessary continually to repeat it.

Backbench Business
	 — 
	[11th allotted day]

Banking Reform

Mr Speaker: It might be for the convenience of the House to know that I have imposed, on account of the level of interest in this subject, a six-minute limit on each individual Back-Bench contribution, such limit to take effect when the mover of the motion has completed his speech. I would add also for the benefit of the House that I have selected neither of the amendments on the Order Paper.

Michael Meacher: I beg to move,
	That this House, concerned that no action has so far been taken which would prevent a recurrence of the financial crash, calls upon the Government to establish a clearing house for approval of all financial derivatives and to set in place alternative mechanisms to remove the implicit taxpayer guarantee, other than to purely deposit-taking banks, in the event of any future banking collapse.
	The motion is on the Order Paper through the good offices of the Backbench Business Committee, and I take this opportunity to congratulate the Committee and its Chair on the way in which, in my view, they have already opened up Parliament to valuable new procedures and paved the way for important debates that might otherwise not have happened. I hope and believe that this might be one of them.
	I begin with the words of the managing director of the International Monetary Fund, Dominic Strauss-Kahn, who a few weeks ago told  Stern magazine that he thinks a second financial crisis is almost inevitable given the paucity of reform and the vulnerability of the financial system, and that next time round it may well be impossible to persuade taxpayers to fund bail-outs. I do not believe that is an exaggeration, and the latest travails of the eurozone serve only to underline those fears.
	It is worth noting that we in the UK have more bank lending as a proportion of our gross domestic product than even the Irish-some £7 trillion, which is five times our GDP. If we are to prevent a repetition of the financial crash, it is clear that its causes must be identified and dealt with by appropriate means. I argue that those causes, in the main, include: an over-lax monetary policy that encouraged an excessive leveraging culture; extreme light-touch regulation that left too much to the markets; the development of a vast global market in credit derivatives, which were not well understood, and which Warren Buffet, the world's second richest man, notably described as
	"financial weapons of mass destruction";
	the role of enormous bonuses, which drove recklessness; a banking structure so over-concentrated in the lead banks that when disaster struck, they were judged to be too big to fail, with catastrophic consequences, as all hon. Members well know, for national debt and the budget deficit; and a banking model that linked speculative investment with retail deposit taking, both of which were protected by an implicit taxpayer guarantee. I hope that that description is accepted on both sides of the House.
	All those causes need to be dealt with, and yet none has been. Given the limited time, of which I am very conscious, I want to concentrate on the most important. First, financial derivatives are a perennial candidate for causing the next crisis, because they add opacity and leveraging to the financial system. Credit default swaps, a £65 trillion market, and collateralised debt obligations, which are one of the most common derivatives, urgently need regulation.

John Redwood: rose -

Michael Meacher: I will give way to the right hon. Gentleman, but having heard what Mr Speaker said, I am reluctant to take more interventions, precisely because this is a very short debate-only three hours-and many wish to speak. We already have a six-minute limit, and I have too often been at the back of the queue, unsuccessfully waiting to be called at the end.

John Redwood: I am grateful to the right hon. Gentleman, and I shall refrain from intervening at great length for the very reason he gave. Will he explain to the House why over the past decade the UK banking regulator allowed the huge expansion of balance-sheet risks of all kinds, and why it did not demand more cash and capital?

Michael Meacher: I mentioned light-touch regulation in the City of London, which we have had since the Thatcher era and through the Blair era. I believe that that needs to end. We want not excessive but adequate and proper regulation, and for the past three decades, in the so-called neo-liberal era, we have not had it.
	Derivatives should be approved by the regulatory authority before they can be issued. At that stage, they can be either prohibited or accepted, perhaps with certain conditions attached. The key point is that transparency is essential. It is worth noting that the recent Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to achieve that by requiring that all derivatives are traded on public exchanges.
	Linked to that is the role-or perhaps the scandal-of the credit rating agencies in allocating a spurious status to some highly dubious securities. Light-touch regulation in this country has evaporated into virtual deregulation. Credit rating agencies were paid by the very institutions whose credit worthiness they were supposed to be assessing. By granting the highest rating, as they so often did, they made it easier for the banks that were securitising and further repackaging debt to create the greatest possible number of securities with the lowest possible regulatory cost. That practice should never have happened, and I believe that it should always be prohibited where there is a serious conflict of interest, as there was in that case.

Sajid Javid: rose -

Michael Meacher: I know of the hon. Gentleman's expertise in this matter, and I will give way to him, but I will not give way subsequently because I want to speak for only about a quarter of an hour.

Sajid Javid: Does the right hon. Gentleman realise that the price of credit derivatives over the past three or four years has been far more accurate as a predictor of default risk than the credit ratings given by rating agencies?

Michael Meacher: The hon. Gentleman makes a good point of which we need to take account, but I still think that the credit rating agencies potentially have an important role. They are listened to in the market, are the basis on which financial transactions take place, and should be trusted, but in the present circumstances they are certainly not. However, I am grateful for his question.
	On bonuses, there is outrage among not just Opposition Members but, for example, right-wing Governments in Germany, France and Sweden, that a banking system that owes its continued existence to massive Government intervention should pay itself mega salaries and bonuses entirely out of line with the top of business, let alone ordinary taxpayers. There is outrage especially because those gigantic bonuses often drove the recklessness in the first place. The overweening power of the banks attracts almost universal hostility, especially given that 90% of investment bank profits, in an era of austerity, are directed not at strengthening balance sheets, at shareholders through dividends, at customers through lower fees or at taxpayers, but at bonuses.
	France, among several others, has demanded a mandatory cap and that there should be no guaranteeing of bonuses, but Whitehall, as usual of course, argues that it would not be practical. However, if the G20 Governments insisted on limits and made continued liquidity provisions dependent on compliance, no bank could refuse. I believe that Her Majesty's Government should now be taking the lead in the G20 not in succumbing to lobbying from the City of London and the British Bankers Association, but in reining back bonuses on a much greater scale than we have so far seen, and to much lower levels, and in ensuring that they be paid only in exceptional circumstances.
	On the broader question of averting future financial crises, attention has so far largely focused on enhancing capital control, but that does not actually have a good record in this regard. At the outset of this latest crisis, virtually all financial institutions across the globe had capital adequacy of between one and two times the minimum Basel regulatory requirements-at least at that level, and in some cases twice as much. Basel III, which has just reached its provisional conclusions, is scarcely any improvement. The core top-tier capital requirement is only 4.5%, and the contingency capital requirement is only 2.5%. Of the EU's top-50 banks, 45 already meet that standard, and Basel III is actually proposing that the requirement not be introduced until 2019. This is simply nowhere near good enough. A much better possibility might be counter-cyclical capital controls, enforcing different levels of bank capital at different stages in the economic cycle. I can see the point of that, but I suspect that it would leave open the problem of the degree of ratchet and the timing of it. I suspect that that would be far too problematic.
	An alternative approach-many have talked about this-is the introduction in Britain of something like the Volcker rule, restricting banks from undertaking certain kinds of speculative trading, notably proprietary trading. Of course that would certainly stop banks doing what they are doing at the moment, which is trading on their own books with the money of depositors. The key point, however, is that it would not overcome the too big to fail problem when applied to investment banks. For example, I do not think it would prevent a repetition of the collapse of Lehman Brothers; neither would it address the interconnectedness-the Chancellor was speaking about this a few moments ago-of today's banks, with counter-party relationships and exposure between commercial and investment banks, and insurance companies. That is the problem. I say this with regret, but any rule-based reform is almost certain to face the risk of regulatory arbitrage, because financial institutions invent ever more sophisticated products that are simply aimed at getting around regulatory controls. I therefore do not think that what I have described is an adequate answer. For all those reasons, the force of argument and the balance of advantage point strongly towards separating retail from investment banks, in establishing distinct, narrow banks that are conservative, transparent institutions with no financial instruments or incomprehensible balance sheets.

Andrew Tyrie: rose -

Michael Meacher: I am being intervened on by someone whom I cannot resist. I am only too glad to give way to the Chairman of the Treasury Select Committee.

Andrew Tyrie: I am grateful to the right hon. Gentleman. On that point, does he agree that the Government have done the right thing by creating the Vickers review? The review will examine, in depth and carefully, without rushing a reform, whether structural reform of the banks is required, and will give us guidance on how to protect ourselves from the too big to fail problem.

Michael Meacher: I entirely agree with that, and I was just about to make the same point myself. I hope I can also take the hon. Gentleman with me when I say that Parliament should have the opportunity to express its views to the Vickers commission before it reports, rather than simply making comments when its work is virtually a fait accompli. Indeed, that is one of the purposes of this debate.
	The key advantage claimed for the model that I am describing is that it would remove the implicit taxpayer guarantee-that is, the capacity of the financial conglomerates to use retail deposits, which are implicitly guaranteed by Government, as collateral for proprietary trading; or, as the Treasury Committee put it, I think rather nicely, banks playing
	"at a high-stakes casino table with...taxpayers' chips."
	I have a lot of respect for this model, but the crux of it is that the withdrawal of the taxpayer guarantee would be a sufficient deterrent to prevent investment banks from engaging in highly risky investments that might collapse, with serious and far-reaching consequences for the national economy. The real question-which I do not think enough people have asked-is whether that is likely to be true. The fact is that if a financial institution outside the protected narrow banking boundary threatened systemic contagion, it is difficult to believe that the Government would not attempt some form of bail-out. I therefore have to say, regrettably, that I doubt whether the narrow banking model could, by itself alone, be relied on to overcome the problem of moral hazard and too big to fail.
	Does that mean that there is no solution to the too big to fail problem? Not necessarily. There is an alternative to narrow banking as a means of preventing a bank from gambling away other people's money, which is the recent Kotlikoff proposal in the US. It is a proposal that deserves serious consideration-consideration that I hope the Vickers commission will give it. In the US context, it is proposed that all financial companies become pass-through mutual funds. They would have a 100% equity ratio, to ensure bank solvency, and the payments function of banks would be performed by cash funds that would be 100% reserve-for example, through Treasury bonds. Such banks could, of course, still initiate new mortgages and new loans, but these would not be funded through deposit accounts until they had been sold to a mutual fund. The key point is that the bank would never hold them; in other words, the bank would never have an open position. Banks would not own assets-apart, of course, from their offices and so on-and they would not then be in a position to fail or trigger a bank run. That is a significant proposal.
	For those-and there are plenty of them-who want to take greater risks beyond a cash-based mutual fund, there are already hundreds of investment avenues that would continue to be available, such as foreign exchange, derivatives, real estate, hedge funds and all the rest. The key difference with this limited-purpose banking would be that any failure in such investments would be incurred by the investor, not by the bank. That is the crucial point. There would be no problem with the banks being too big to fail or trying to insure the uninsurable risk of financial contagion. Critically, there would be no future claims on the taxpayer.
	This reform would overcome a critical market failure without the need for any vast new complex regulation. I say that for the benefit of those on the Government Benches. It is, in effect, a market solution. It is true that it would not necessarily prevent asset bubbles-I do not think that anything can do that, certainly not in this area-but under limited-purpose banking, such bubbles would not threaten the entire financial system. Anyway, there would be nothing to preclude some form of macro-prudential authority from having oversight in this area. I think that that would be a very good idea.
	I am not suggesting that this reform would be a panacea, because I do not believe that a panacea exists in this area. It should, however, be thoroughly investigated by the Vickers commission and, I hope, by the Government. I do not think it is an exaggeration to say that at present Britain has the most profoundly dysfunctional banking system of any G7 country. It came nearer to collapse than any other in the autumn of 2008. I believe that we need to break up the mega-banks, with their addiction to mortgage lending. We need smaller banks and, in particular, specialist business banks such as infrastructure banks, housing banks, green banks, creative industries banks and knowledge economy banks. Only that kind of fundamental reform of the banking system, involving all the elements that I have described, can provide the foundation for the economic and social transformation of this country that we all want. I commend the motion to the house.

Several hon. Members: rose -

Nigel Evans: Order. A six-minute limit will apply to all Back-Bench speeches.

Douglas Carswell: I congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on securing this debate. He made some important, and actually rather sensible, points and gave a powerful critique of the status quo from a position on the left. However, as a free marketeer, I have to disagree with him. I believe that we need a free-market critique of the status quo, but the centre-right has failed to think critically about the status quo for too long. The right hon. Gentleman has therefore done us a great service by forcing Conservative Members to ask the questions that for years we have failed even to ponder. We are in this mess not because of an absence of the free market but because we do not have a proper system of free-market banking. It was not the markets that caused the banking mess that we are in; the markets called time on other people's unsustainable folly. They called time on an unsustainable credit boom and on the folly and stupidity of central bankers.
	Banking is undoubtedly corporatist. To put it another way, if one were to read Ayn Rand's "Atlas Shrugged" and to replace the words "railroad" and "rail company" with the words "credit" and "bank", one would get a pretty good description of what has been going on in recent years. We have had a failure of the free market in the allocation of credit in this country. It is extraordinary that we compound that failure by talking ourselves into seriously suggesting that politicians and technocrats should ration credit. The absence of a pricing mechanism at the heart of the banking system is ultimately what caused the credit boom and the banking failure. In a normal market, when demand for a product increases, the price for that product goes up. That, in turn, stimulates supply.
	In banking, unfortunately, things are a little different. When demand for credit increases, the price-the interest rate-is kept low or constant. Pricing does not therefore stimulate increased supply. On the contrary, a supply of additional credit is not met through higher savings. It is met by the creation of candyfloss credit-by banks being able to conjure up credit out of thin air. Banks do not meet the additional supply of credit by encouraging more people to save; on the contrary, they continue to lend IOUs on the basis of IOUs on the basis of IOUs. At the height of the credit crunch, for every pound deposited in a bank, IOUs had been written out some 44 times through the miracle of fractional reserve banking.
	Banks have a legal privilege to conjure up credit out of nothing that ultimately stems from their ability-this is an extraordinary fact-to call a depositor's deposit their own, to treat it legally as if it were their own, and to lend against it many times. It is that practice that has resulted in a credit pyramid and runaway credit booms, unrestrained by the pricing mechanism that would normally apply and would normally restrain demand and supply. The demand is unrestrained, the supply is unrestrained, and the price is low. The result is Ponzi credit bubbles. An incredibly distortive and disruptive effect is created every 20 or 30 years in supposedly free-market economies that have corporatist banking at their heart, and it leads to sugar-rush booms.
	If a whisky distiller sold empty bottles or a food manufacturer sold empty food packets, they would be done for selling thin air, yet banks are essentially allowed to sell empty IOU promises-and people dare to call that the basis of the credit system that fuels capitalism. No wonder capitalism appears to be at risk. We have a crony system of corporate capitalism rather than free market banking.
	Since the credit crunch, experts in orthodoxy have talked about three different solutions, the first of which is low interest rates. We have had pretty low interest rates, and do you know what? It has not really stimulated an increase in the supply of credit. That should not surprise us. Keeping prices low does not stimulate production. Secondly, people have printed more money: big government has shored up a big corporatist banking pyramid on the back of the real wealth creators. It is a system of indirect taxation, inflation and debauching the currency. Thirdly, people have talked about breaking up the banks.
	I disagree with all those proposed solutions, but I take issue particularly with the idea of breaking up the banks. I think that instead of crude institutional separation of the banking system, we need an alternative that allows legal separation within existing banking structures. We need a new legal status for deposits, so that a depositor who opens an account can choose to ensure that his deposits are legally his property, and the bank cannot endlessly lend against them. That would not abolish fractional reserve banking, but it would allow us to decide over a long period, organically, whether we needed to move away from the banking system that we have at present, which allows endless candyfloss credit to be manufactured.
	Banks do need reform, but I do not believe that they need more controls. We need to address fundamental flaws in the banking system, but in a way that ensures that the pricing mechanism allocates the supply of credit properly. We need less from central banks and fewer controls from central bankers, not more.

William Bain: It is a pleasure to be able to contribute to this important debate. I thank my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) for having the good sense to persuade the Backbench Business Committee to secure it. It is also a pleasure to follow the hon. Member for Clacton (Mr Carswell). I agreed with some of his remarks, particularly the one about breaking up the banks.
	When I was preparing for the debate, I had occasion-and a little more time than I expected, owing to my difficult journey from Scotland to London today-to examine an excellent study of the banking crisis by three major economists in a book entitled "Balancing the Banks", by Mathias Dewatripont, Jean-Charles Rochet and Jean Tirole. Jean Tirole's chapter in particular details, in very precise order, the reasons for the crisis and makes several points. First, it deals with the crisis in United States home loans, which spread to other sectors and other countries. The staggering expansion in the level of securitisation partly explains the difficulties that the US banks got into. Between 1995 and 2006 the proportion of loans that were securitised rose from 30% to 80%, and the proportion of sub-prime loans that were securitised increased from 46% in 2001 to 81% in 2006. Jean Tirole also points out the lack of high-quality collateral backing many of these loans, which particularly came to our attention when the inter-bank bond and derivatives markets simply froze up. Added to that, excessive liquidity fed the demand for securitisation. As my right hon. Friend the Member for Oldham West and Royton pointed out, monetary policy was also very loose, particularly in the United States, and the performance of credit rating agencies hardly covered them in glory.
	Another important point in understanding what went wrong is the failure of international regulation of the banks. For example, the level of off-balance-sheet liquidity support increased hugely, especially in America. There has also been a need to rediscover what prudential regulation of the banking system should be about. It should be about, first and foremost, protecting small depositors and investors, but also containing the domino effects of systemic risk.
	We should therefore welcome some of the recommendations of the Basel Committee on Banking Supervision. The key failure of Basel II was its reliance on pro-cyclical capital controls, and one of the Basel III reforms we should welcome is the introduction of counter-cyclical buffers. I think it is also true to say that Basel II was too complex. It was based on a pillar structure that was both difficult to understand and unable to anticipate systemic risks to the banking system or, indeed, manage financial innovation. As my right hon. Friend pointed out, it was unable to predict the chaos that credit default swaps and collateralised debt obligations would create throughout the world. There needs, therefore, to be an increase in the capital and liquidity banks should hold.
	I disagree, although only slightly, with my right hon. Friend in one respect, however. Basel III does introduce a powerful counter-cyclical element of up to 2.5%, which may be significant in preventing future problems. There is also a balance to be struck.

Charlie Elphicke: Is the hon. Gentleman aware that Basel III also seems to introduce an incentive for increased invoice discounting and trade factoring, and is that not slightly undesirable?

William Bain: The hon. Gentleman raises an interesting point. I was about to make the point that Basel III strikes a balance between protecting the taxpayer and the state and promoting economic growth. I understand the banks have been lobbying to try to diminish some of the effects of holding extra capital. Indeed, when I met a representative from Lloyds Banking Group in Glasgow on Friday, he lobbied me to take that position.
	What we have witnessed is a crisis that began in the housing and asset price markets in America. It spread to other countries and to the banks of other countries, and it has now also spread to the state. It is important that the taxpayer can see that there are buffers to prevent the state from having to bail out banks across the globe. Having a counter-cyclical element should help achieve that.
	The Government should continue the work the previous Government did in pursuing the issue of getting a global deal on bankers' bonuses. If they do not, or if they are unable to achieve a global deal, the UK and the EU should be prepared to take a lead in giving greater transparency and reducing some of the terrible incentives to sharp practices in the last decade.
	Across the world, we are seeing the terrible effects of a credit crunch causing a banking crisis, in turn causing a deficit crisis and then a growth crisis. In the coming months and years, we need to put in place a policy that sorts out the system for good. We need a policy that learns the lessons from the crisis and ensures the taxpayer never has to foot a huge bill for the terrible behaviour of a greedy few.

Sajid Javid: I thank the right hon. Member for Oldham West and Royton (Mr Meacher) for securing this debate, which is a valuable one to be having in the House. I draw the attention of hon. Members to my entry in the Register of Members' Financial Interest, which is a legacy of my spending 18 years in the banking industry. Before Labour Members get a bit too excited by that revelation, as many have unfortunately done in the past, I should say that for the past three or four years I felt that the profession of banker was possibly the worst to have in the eyes of the public, but that was before I became a Member of this illustrious House.
	The motion states that we want to
	"prevent a recurrence of the financial crash".
	Obviously we are all united on that, but it is important that we examine the causes of the crash, which we could debate for a long time and go round in circles. I am sure that many rational people will disagree on the responsibilities of banks and bankers. I may have misunderstood the motion, but it seems to suggest that banks are entirely responsible for the financial crash. That is wrong and it does not do justice to Members of this House or to our constituents in preventing something like this from happening again.
	The financial crash happened because too much money was chasing too few assets-financial assets or real assets such as real estate. There are three principal reasons for that, the first of which was that world financial reserves, particularly in the east, were growing at a substantial rate. Indeed, they continue to do so, as more people in the west consume goods from the east. To give just one illustration, China's financial reserves in 1990 were $165 billion but today they are $2.65 trillion. Those reserves needed to find a home.
	The second reason is that commodity prices have grown substantially, partly as a result of the growth of the east and other emerging markets, and that has led to a substantial increase in sovereign wealth funds, both in the middle east and in other markets. Those funds also needed to find a home, and they created a colossal wall of money when combined with the financial reserves.
	The third reason is something that bankers have called the "Greenspan put". Alan Greenspan became chairman of the Federal Reserve in 1987, just before the Wall street crash, and one of the first things he did when he found a problem in the financial markets and a potential crisis brewing was to lower interest rates as quickly and as substantially as he could. That happened again when the US Federal Reserve led the way after the dotcom bubble burst in 1991, again when Russia had problems and there were problems in Asia, and it has just happened again. Bankers have got used to that approach and it results in what the markets call a "put", whereby they feel they can sell assets if things go wrong. That has encouraged bad behaviour and a moral hazard: the idea among many bankers of "heads we win, tails the taxpayers lose".
	In addressing these issues, we must not forget those key facts about what caused the crisis. However, bankers did play a significant role and there are things about banks that we need to examine. Although there are issues to address in respect of financial derivatives, I would not make that the key priority. The first thing to examine is the idea of retail banks and commercial investment banks acting as one entity, because that seriously needs to be looked at.
	I started working in the banking industry in New York in 1992. Under the Glass-Steagall Act, which was in place at the time, the bank I worked for had to have a completely arm's length relationship with its retail banking division. That made a big difference to the risks the bank took or even contemplated taking. That situation changed in the late 1980s in Britain, when the big bang took place and the implied Glass-Steagall arrangement disappeared, and it formally changed in the United States in 1999 when that Act was removed. It is vital to examine that. The second thing to look at is, as has been mentioned, banking capital itself.

Chuka Umunna: Would the hon. Gentleman be prepared to share his thoughts on whether we should return to a Glass-Steagall model, which I understand the Clinton Administration did away with when in office?

Sajid Javid: There are some considerable merits in that model and given what has happened we should consider it seriously. I hope that the Vickers commission does that.
	Secondly, we should consider the banks' capital requirements. It is right that under Basel III capital requirements should be lifted. The core tier 1 capital requirement will be lifted from about 2% for banks to about 7%. Some points are still missed, however. The focus is far too narrowly on the default risk of assets and we have strange incidences even with default risk-for example, under the new proposals industrialised sovereigns are still considered to be risk free. As we speak, Ireland's 10-year Government bonds are trading at more than 11%, Spain's 10-year bonds are trading at more than 6% and Germany's are trading at more than 2.5%, but they are all treated as zero-risk weighted and no risk capital will be set aside. No account is taken of liquidity, either. One of the largest problems for banks over the past three or four years was lack of liquidity, but the capital requirements do not take full account of that.
	One of the biggest mistakes that made Britain's situation far worse than that of other countries was the change in regulation when Tony Blair's Government first took office. The jobs of people at the Bank of England, who knew what they were doing, were taken over by people at the Financial Services Authority, who did not know what they were doing. I remember an FSA audit where the chief auditor of my credit derivatives book, which had a market value of more than €100 billion, was a 27-year-old with a degree in biology. It is no wonder that problems started to happen. We do not necessarily need more regulation, just smarter regulation.
	There are many issues to consider that we could debate for a long time. Banking regulation is one such issue, but we do no service to our constituents if we merely focus narrowly on it when we consider the lessons of the financial crisis.

George Mudie: I compliment the hon. Member for Bromsgrove (Sajid Javid) on a thoughtful speech. At one point, I disagreed with him and at other points I found myself very pleased with the sentiments that he expressed. The Backbench Business Committee deserves congratulation for tabling the motion and I hope we will have more opportunities to discuss the subject in Government time. We must reach consensus if we are to get this right.
	I worry, particularly against the background of what is happening in Ireland, that we are going too slowly. There was an argument in the beginning that we should not do things in haste and that was sensible, but three years on from the time Northern Rock went down we should be starting to implement some of the measures, not merely discussing them. I know that there is an international context, but on the domestic front we should be further forward than we are.
	The Government's amendment mentions matters such as "regulatory architecture" and "prudential regulation", both of which are part of the package that is going through the Select Committee on the Treasury and that will eventually come to the Floor of the House. I am not sure that they alone will matter. Basel III, according to the Governor of the Bank of England, "won't prevent another crisis". I think that is fair.
	So, Basel III, regulatory architecture and prudential regulation are what the Government initially-certainly in this low-key debate-are putting forward as important. They are secondary to an acceptance by those who are in the banks and who own the banks of the fact that they need regulating and that they should share the objectives of the regulators. Sadly, in the past three years I have not seen any signs that that has been accepted at a senior level in the banks. If we were to look for one person, organisation or thing that started or caused the crisis, we would be wrong, but central to it were the banks' securitisation exercises and adventures, which paralysed the whole financial structure and the wholesale markets. They must be accepted as a major part of where we are now and of what we have gone through.

Jim Shannon: The last bank bail-out-for the Royal Bank of Scotland, Lloyds TSB and HBOS-cost £37 billion and we were told that there would be conditions on staff bonuses, but nothing has happened in the past three years. Does the hon. Gentleman agree that one of the things that annoys people the most is the bonuses that go to staff members when the banks are not doing their job?

George Mudie: The hon. Gentleman makes a very powerful point which links with a point I was about to make. I have described the regulatory structure. There are differences between regulators throughout the western world, but the fact that they were all caught out shows that structure is secondary and that changes to structure alone will not prevent another crisis. We have all been affected despite those different structures, so one cannot attack regulatory structures or see them as a salvation. I regard such restructuring as simply rebuilding the Maginot line: it shows the public that we are doing something, that we are hard at work and that there is something concrete, but when it comes to effectiveness, it would suffer from the same deficiencies as the original Maginot line, so I do not think that structure matters.
	If the banks, the bankers and their shareholders do not accept that they have to change their practices then what do we have? We have no regret from the banks and no acceptance that they played a part in events. Let us consider their behaviour over bonuses.

Andrew Bridgen: Will the hon. Gentleman give way?

George Mudie: Let me finish my point and I certainly will. The behaviour of the banks over bonuses at the senior level is obscene and offensive to every one of our constituents. At a meeting on Saturday morning, I spoke to someone whose wife works for Halifax. She is going to lose her job. If one speaks to people in every part of the community one finds that they are looking forward to 2011 with great worry and concern because more than 100,000 of them are going to lose their job in the public services alone.

Mel Stride: Will the hon. Gentleman give way?

George Mudie: Excuse me for a second. Given the amount of money that the state has pumped into the banks to rescue them, it is unacceptable that bankers and senior bankers still, at this stage in the game, demand obscene bonuses at levels that many people could never think of earning even when they have worked all their life. That shows a state of mind that is not exactly right. We hear that if all that does not work, Bob Diamond will take business away from the UK. What on earth is the point of spending time building up a regulatory structure if that is the attitude? For safety, I join the hon. Member for Bromsgrove (Sajid Javid) in thinking that Glass-Steagall is a good alternative, but unfortunately for us both, as we move in that direction the Governor of the Bank of England seems to be moving in the opposite direction. We can never pin that man down, can we? I think that is the direction we should go in.
	In the minute that remains, I shall explain the reasons other than safety why I support a move in that direction. I know that this might mark me out as old-fashioned, but I want the retail banks to go back to the fine role that they have historically played in financing individuals and small and medium-sized enterprises. That was their function and they did it very well, but that has been lost because the emphasis has shifted to the investment side of banking. If we are talking about rebalancing the economy, the engine for growth must be the banks. If we can get them to move across to their old role and let the investors go off and play their casino games, our real interests will be satisfied because we will get people in the financial world to focus on the productive side of the economy.

Andrea Leadsom: It is always a great pleasure to speak after the hon. Member for Leeds East (Mr Mudie), who is a colleague on the Treasury Committee. He always talks a lot of sense and has explained clearly how frustrated people in Britain feel about bankers' bonuses.
	I am amazed at the wording of the motion. To suggest that no action has been taken so far to prevent a recurrence of the financial crash is quite bizarre.

Andrew Bridgen: The hon. Member for Leeds East (Mr Mudie) talked about no regrets, no contrition and no admission of guilt for taking bonuses. Does my hon. Friend think he was talking about the bankers or former Labour Front-Bench Members?

Andrea Leadsom: To give a cautious answer, I think there was an element of both.
	Last week, I had a meeting with senior bankers and the chief counsel of one bank. They certainly have the sense that the world has changed dramatically for them since the financial crash. As we would expect, both internal and external forces have combined to change things significantly. Tier 1 capital ratios are already significantly higher-from the 2% core at the time of the crisis to about 7% now, which is after all what Basel III will require. Leverage is significantly lower, at an average of 20 times, from about 38 times pre-crash-a considerable change. Many banks welcome the existing proposals to establish a clearing house for over-the-counter derivatives.
	According to Hector Sants, the Financial Services Authority has quadrupled the extent of its regulatory investigations. He has even made comments about how afraid banks should be of him. The Bank of England special liquidity scheme still provides about £130 billion of liquidity to banks, enabling them to switch illiquid but good assets for Government bills. All those things are important changes, and they are only a few of the steps taken so far.
	Still to come, in 2011 and 2012, are the new regulatory structures in the UK and Europe that will radically improve regulatory accountability. Instead of the FSA looking to the Bank of England and the Treasury for solutions-as in the case of Northern Rock-we will in future have a far stronger Bank of England. It will not just have responsibility for monetary policy and as lender of last resort; the Governor will also be ultimately responsible for individual bank supervisions and, critically, through the Financial Policy Committee, for the overall health of the financial system.
	To speak of no action is completely wrong, but that is not to say that a lot more could not be done. It certainly could, and especially about two things: accountability and competition. Specifically, the competition issue worries me at all levels of banking. If we go back to Adam Smith and "The Wealth of Nations", we see that to have successful free enterprise, we must have free entry and free exit for market players, but looking over the past 20 years, we see that consolidation in banking and the increasing costs of regulation have helped to create an industry where there are huge barriers to entry.

Justin Tomlinson: Does my hon. Friend agree that it is also essential to maintain diversity in the financial services sector to improve competition and drive down consumer costs and charges?

Andrea Leadsom: Absolutely. I was about to make exactly that point. Not only have there been far too few new entrants, we have seen only recently that banks are unable to fail; we cannot risk allowing a bank to fail, as the situation in Ireland has highlighted yet again. Regulation has trumped competition for too long.
	It is not simply a matter of being too big to fail. Some of the biggest continuing concerns are about the medium-sized banking sector in the States and in Germany. The same mistakes must never happen again. We need to look to where the next crisis will come. It is absolutely key to introduce more competition and more accountability, and I would consider three areas.
	I should not look to split retail and investment banking, which are artificial barriers. They may have worked in the 1920s and 1930s, but now they are too big a grey area. We simply could not do it. Bankers would just find clever ways to get round such measures.
	I declare an interest. I have been in banking even longer than my hon. Friend the Member for Bromsgrove (Sajid Javid), as I have been in investment banking and funds management for 23 years. I assure the House that I have seen from all ends how clever bankers are when they want to get round something.
	To address competition in the retail and mortgage markets, I would consider ways to let account numbers follow the consumer-one of the biggest barriers to moving an account, as we probably all know. I should love to know how many Members in the Chamber have changed their bank account or mortgage account recently. It is a huge headache.If we let the account number follow the consumer, that would immediately create far greater competition and far greater choice and availability of moving. It could also remove barriers to entry.
	Secondly, to address competition in wholesale markets, I would consider giving the new Consumer Protection and Markets Authority a specific competition objective, which would mean that one of its roles would be as a specialist competition commission-not just the Office of Fair Trading, but a specialist commission-that would consider whether, in a particular sector or in a particular geographic region, a bank had a monopolistic or oligopolistic market share. It ought to have a statutory ability then to enforce its recommendations.

Jo Johnson: Does my hon. Friend agree that the role of regulators in promoting and sustaining competition in the UK financial services market has been greatly complicated by the decision of the previous Administration to allow the merger of Lloyds and HBOS, and to waive all competition criteria which would normally have been applied to such a merger?

Andrea Leadsom: That is absolutely right. We are certainly in a worse position than we were pre-crisis in terms of a lack of competition and massive market share. The five top players in the UK dominate the mortgage market, the retail market and much of the wholesale market.
	The third thing I would do is ensure proper pricing of bank risk. That is where one of the fundamental problems has been. Credit ratings agencies are culpable in their own activities, and banks are culpable in following the lead of credit ratings agencies and not bothering to do their own proper credit analysis. Part of that I put down to the fact that it has been far too easy for professionals and retail investors simply to buy bank debt and equities, without bothering to do their own analysis because there has been an implicit Government guarantee. The credit ratings agencies have automatically made them all double A or triple A, so it seemed like a no-brainer.
	Unfortunately, there has been no downside, and something must be done to change that radically to ensure that there is a downside to investing in bank risk. Measures such as living wills, and subordinating bond-holders to depositors and equity owners, are ways to ensure that in future it is not the taxpayer who pays for banks' mistakes.
	Finally, if competition and accountability are to be the revolution in financial services for the future, it is essential-going back to what the hon. Member for Leeds East, my colleague on the Treasury Committee, was saying-that bank directors take some responsibility. Directors who break a bank should be fired, without bonuses, pay or early pension, and if criminal negligence can be shown, the ultimate penalty of prison should not be ruled out. Accountability is key.

Chuka Umunna: I, too, congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on initiating this important debate. I welcome the fact that we are conducting it in a reasonably non-partisan way. I have listened with interest to the comments of my fellow Treasury Committee members, and the last three contributors in particular. Although I do not agree with everything that has been said, there is much common ground.
	My general approach is that we should not set out to destroy the City. It makes a valuable contribution to our economy, not least to the tax take of the Exchequer. I spent much of my legal career working there and I know that a number of other Members present also worked there for some time. The important thing is that we reform the City so that it is run in the interests of all the British people, not in the interests of a few people in the square mile, as often seems to happen. Above all, let us reform it so that never again do any of our constituents have to pick up the tab for the mess in the sector.
	We should be clear. All major political parties and Governments across the world bear responsibility for allowing what happened to develop. Let us face it: the consensus pre-crash was for a light-touch model of regulation. However, we should not forget-this is where I differ from some other Members-that it was ultimately the bankers who were to blame. Now we have to resolve what happened.
	I disagree with the motion in that it suggests that nothing much has happened. I am glad to hear that other Members disagree with that. Let us look back to the G20 in April 2009 and recall what was achieved there, following the leadership demonstrated by the former Prime Minister. I remember him being ridiculed as he went around the world trying to galvanise consensus on a set of outcomes, but the summit produced outcomes that have been built upon. Three come to mind. First, the leaders resolved to establish the Financial Stability Board, the successor to the Financial Stability Forum, and as a consequence the world has a standing body of Finance Ministers, regulators and central bankers, which seeks to provide early warnings of financial risks and has a greater mandate to promote financial stability globally.
	Secondly, the leaders who attended the summit took concerted action to improve the quality and quantity of capital in the banking system, and I endorse the comments of the hon. Member for South Northamptonshire (Andrea Leadsom), one of my Treasury Committee colleagues, because what came out of it-with the FSB and the Basel Committee on Banking Supervision working together -helped to produce more stringent capital adequacy requirements and the minimum equity requirement will go up to 7%. Perhaps it is regrettable that that will not happen until 2019, and perhaps it could be sped up, but it has definitely made a difference.
	Thirdly, the leaders resolved to endorse and implement new principles on remuneration, and, as a result, in the March Budget the former Government put in place the apparatus within which a remuneration disclosure scheme could be enacted.

Jonathan Edwards: Does the hon. Gentleman agree that, if there is greater transparency on bonuses, the threatened diaspora of bankers will be nothing more than hot air?

Chuka Umunna: The apparatus would help to introduce greater transparency on bonuses, because if we want to do something about reckless remuneration we need to know about it. I speak to many people in the City, and, although some of course disagree with the measure, many accept that it needs to be introduced. Action was taken, but some measures are still outstanding.

Charlie Elphicke: Will the hon. Gentleman give way?

Chuka Umunna: I am going to make progress, because I do not have much time.
	I welcome the introduction of the independent banking commission, which the new Government were right to set up. Without pre-empting the commission, I firmly believe that we should separate retail from investment banking. There is some consensus on that, but it is a question of degree.

Steven Baker: Will the hon. Gentleman give way?

Chuka Umunna: I am afraid I am going to continue.
	Do we go for the Dodd-Frank model, which has just been implemented in the United States, or the Glass-Steagall model, which was in place from the 1930s until recently? Mervyn King has moved a little on the issue. At the Treasury Committee last week, he was very clear that he would not give his view on it until the Vickers commission reports, but Lord Turner doubts that it is possible to separate proprietary trading from commercial banking. That is why I am sympathetic to the Glass-Steagall model, but I am happy to see what the banking commission comes forward with.
	I shall conclude by considering some wider issues. I should like two key outcomes from the reforms currently being implemented. First, to pick up on the comments of my hon. Friend the Member for Leeds East, we need to return to the notion of our banks as a utility. They are a utility and should be treated as such, because they are absolutely essential to our everyday lives. We have lost sight of their purpose, because we have a allowed a big, shadow banking structure to evolve while 1.75 million adults on lower incomes do not have access to basic banking services. I should like us to introduce a universal banking obligation, so that everybody has access to such services. It is a great shame that the Government have decided to do away with their commitment in the coalition agreement to introduce a people's bank through the Post Office, because that would have been very good.
	Secondly, I agree with the hon. Member for South Northamptonshire that we need greater diversity in the sector. It is dominated by a few major players, and there has been only one start-up entrant in the market, Metro bank, since 2008. In particular, I should like serious consideration to be given to breathing life into the mutuals sector. Why do we not seriously consider remutualising Northern Rock and Bradford and Bingley, as opposed to privatising them, so that we increase the diversity of providers in the sector for our constituents?
	There is no magic bullet when it comes to reforming financial regulation. The previous Government made a good start; it is absolutely crucial that the coalition Government build on that.

Stephen Barclay: It is a pleasure to follow the well crafted speech of the hon. Member for Streatham (Mr Umunna). I, like him, welcome the chance to debate this important issue. I must preface my remarks by declaring, in the interests of transparency, that I too used to work in the industry. I worked on both sides of the regulatory fence-as a regulator in policy and supervision roles, and in the insurance and banking sector-prior to entering the House.
	The depth of anger felt by our constituents is very much underestimated in the City and in Canary Wharf. Constituents might hear the technical jargon that is often used in such debates, but they are not confused by what went on: they know that senior bankers made big mistakes yet kept their massive payments; they are incredulous that the banks have returned so quickly to paying bonuses, as the hon. Member for Leeds East (Mr Mudie) said; and they are frustrated that the rhetoric of reassurance from the banks is so often at odds with their own experience as customers, particularly when it comes to the fair treatment of customers.
	As my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) pointed out, the motion is-dare I say it-poorly drafted when it states that "no action" has taken place. Indeed, the hon. Member for Streatham endorsed that view from the other side of the House. There has been a flurry of regulatory initiatives, such as more intensive supervision by the Financial Services Authority following its admission of regulatory failure over Northern Rock; and on derivatives, which the motion mentions, the capital requirements directive will subject contracts that are not cleared through a funding house to higher capital requirements. So, action is taking place. Likewise, the Government's amendment rightly focuses on structure and, indeed, prudential policy, but it is silent on the key issue on which I shall concentrate: enforcement against individuals in banks.
	Before doing so, I must say that so far the debate has been silent on the short-termism fostered by the pension fund management, and in particular on the pressure that that puts on chief executives, who risk being fired if they do not add shareholder value. In banks, people fear missing the targets set by their chief executive more than they fear the regulator.

Charlie Elphicke: Is not one of the serious issues with bonuses, and the point that my hon. Friend makes, that there emerged a kind of cool option, whereby bankers could receive a bonus but never lose out? Should the system not be reformed, so that bankers are able not only to receive a bonus, but to incur a loss? That would align them more with the return on whatever their bank is up to.

Stephen Barclay: My hon. Friend is absolutely correct, and I shall come on to consider the quantum of fines that have been imposed, because it makes very strongly the point that he makes.
	On the regulatory structure, I am sure that my hon. Friend the Financial Secretary to the Treasury will talk about the changes that the Government are rightly making, because we need to be clear who is in charge in the event of failure. The tripartite system did not make that clear. However, I am sure that he, like the previous Chancellor in his White Paper, accepts that there is no single institutional model to insulate us from a future crisis.
	The Government are also right to focus on prudential policy, but I caution against a reliance on policy itself, because we need only look at how often it has changed. We are already on Basel III, Solvency II and MiFID II -the markets in financial instruments directive-and the next debate is on commission in the retail sector, which has been debated for many years.
	To give a specific example of the flaws in new policy, let me direct the House to "best execution"-one of the features of MiFID that required banks to shop around to obtain the best price. It will not surprise Members to discover that when banks shopped around they happened to find, in accordance with their written policy, that the best possible price just happened to be the one offered by their investment banking arm. Notwithstanding, therefore, the limits of new structures and policy, I believe a clearing house for derivatives would be a welcome step and a key component in addressing opaque financial instruments, such as securitisations, which stopped people obtaining the required visibility in respect of bank balance sheets and which was central to stopping banks lending to each other. Alan Greenspan's claim that derivatives efficiently dispersed risk throughout the financial system ignored the concentration of risk in individual firms. We need only look at AIG to see the effect of that sort of concentration of credit risk.
	A perhaps more technical point is that clearing houses should be more consistently valuing collatoralisation requirements across all banks. The reason for that is the different requirements that apply to UK and German banks, for example, in terms of their capital standards and liquidity requirements.
	The most glaring issue that needs to be addressed is that of enforcement-in particular, the lack of transparency that goes to the heart of the sense among constituents that people have had a one-way bet. That was the point to which my hon. Friend the Member for Dover (Charlie Elphicke) alluded. To give an example, the failure of enforcement and the lack of a taxpayer's guarantee has been material, particularly now that investment banks are not partnerships; I do not think that many partnerships would have leveraged their capital up to 40 times, as many of the banks did. Put simply, the alignment of interest between shareholders who provide the capital and employees who allocate it is not as strong as was historically the case. That is one of the features of a shadow banking system in which the banks had no long-term interest in the securitisations that they structured and underwrote. We would not allow such a thing with an aviation or pharmaceuticals company; they could not design and profit from products that they expected to fail, as Goldman Sachs did with the Abacus deal.
	In the final minute allocated to me, I turn to the quantum of fines. To put the matter in context, no fine has been imposed on any senior executive at HBOS, HSBC, Barclays, Lloyds or Royal Bank of Scotland. The biggest three fines, applied to Northern Rock, amount to less than £1 million-that is, less than the chief exec earned as a bonus the year before. The fines were subject to 20% and 30% discounts as a result of early settlement and on the grounds of hardship. For that reason, our constituents feel that no one has been held accountable. They have seen people walk away with the profits without being held accountable for the things that went wrong. As the Minister looks at the structure and policy, we also need to learn the lessons of why enforcement against individuals has failed.

Alison McGovern: I begin by congratulating the Backbench Business Committee and my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on securing this debate, which has been illuminating and measured. I join the hon. Member for North East Cambridgeshire (Stephen Barclay) on the important point that he made at the beginning of his speech: in the City, there has been a lack of recognition of the depth of anger among many of our constituents. The hon. Gentleman is right about that, and I hope that this debate can start to set that issue right in some way.
	I want to make three swift remarks. My first is about the tripartite arrangements. I want to take the House back in time. I well remember when interest rates were set by politicians. In many ways, our tripartite arrangements have been a success. As economists predicted before the change, Bank of England independence aligned to inflation targets has allowed an independence, a clarity, a robustness and a rule-based approach. It is important to recognise that. We have been discussing a lot, and people have rightly raised, some issues to do with the failures of regulation, but we need to recognise why we changed to the tripartite arrangements and consider the importance of that change in 1997.
	However, today I want to suggest that we cannot just question and consider regulation, important though that is; we need to look for a change of culture in the financial services sector as well. Many people have already recognised the imbalance in respect of the major role that financial services play in our economy, but I do not think that that imbalance is mainly regional-it is not a case of London and the south-east versus the rest of the UK at all. We know of the importance of banking in Scotland, and in my own area of Merseyside, many people work in the financial services sector or in organisations that contract to it. In 2007, such activity amounted to 14% of PAYE and 27% of corporation tax.
	I want to make the point that the impact of the sector is not just that regulation might help or hinder small business; as we have all seen, it also has a massive impact on public services. Getting right the structure, regulation and culture of the sector is one of the most important jobs that we have to do.
	I turn to the importance of the changes that we all want. First, on regulation, the issue is about not just capital requirements but the work that Basel III might-and must-do on liquidity requirements. In many ways, the credit crunch is misdescribed; it should be described as a "liquidity crunch". The question that we need to ask of all banks relates to their access to liquidity as much as to capital.
	Whoever has the supervisory powers, whether the Bank of England or the Financial Services Authority, it is important to determine what those macro-prudential powers actually are. Furthermore, we must have a credible means, transparent and understood by all, of dealing with failed banks. A process needs to be in place. People have mentioned living wills. We need to make sure that what happens with failed banks is understood by all, so that the risks lie with shareholders and people within the system rather than with an implicit taxpayer guarantee. We will see that as the place that we are trying to get to.
	Finally, I leave the House with this thought. If we are to understand the crisis that we went through in 2008-09, we must realise that it was not merely a crisis of regulation. The commission on banking reform that the Government rightly set up should listen to the Chartered Institute of Bankers in Scotland. It has warned Sir John Vickers that new regulation will fail if it is not combined with
	"a firm commitment to embedding a culture of high ethical, professional and technical standards amongst bankers throughout the industry".
	That point is really important. Those of us who see the importance of the financial services sector want a change in its culture as much as a change of regulation. That has to be about high ethical standards.
	In conclusion, I hope that the measured nature and thoughtfulness of this debate will send a message to all about the seriousness in which we hold these reforms.

Andrew Bridgen: Thank you, Mr Deputy Speaker, for letting me catch your eye in this debate; this is a little different from the last time that I spoke. I remind you, Mr Deputy Speaker, that it is not the size of the dog, but the size of the fight in the dog that decides who wins.
	This is an important debate because we need a vibrant, strong and confident banking sector if we are to see the essential growth that all hon. Members desire for our economy. Before we look to the future, it is important that we should address the problems of the past, including the very recent past.
	Many Labour Members seem to be keen simply to bash the bankers and blame them for the financial crisis and recession rather than look at the causal and contributory parts played by their own former Treasury Front Benchers, including the former Chancellor and Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). He has much to answer for, and I wish that he were in the Chamber more often so that he could do so.

Chuka Umunna: Will the hon. Gentleman give way?

Andrew Bridgen: With pleasure.

Chuka Umunna: In fairness to many hon. Members who have spoken from both sides of the House, I should say that there has been a recognition that although the crisis was not 100% the fault of the bankers, they bear a huge part of the responsibility. As I said when I spoke, I think that before the crash there was a consensus around the world that tended towards a light-touch regulatory regime. That is something for which everybody, on both sides of the House and in legislatures throughout the western world, has to take responsibility. That has been acknowledged in the Chamber. Will the hon. Gentleman acknowledge that that sentiment has been expressed during this debate?

Andrew Bridgen: The hon. Gentleman makes that point, but the previous Government encouraged and took part in an orgy of credit: in fact, they led it, and invited individuals and corporations to join in, safe in the knowledge that the former Prime Minister said that he had ended boom and bust, which now sounds as ridiculous as King Canute claiming he could turn back the tide. The taxpayer now has the hangover from that 10-year orgy of credit.
	Under the former Prime Minister's watch, the Bank of England deliberately stoked a consumer boom that led to spiralling house price inflation and massive levels of personal debt. This is not just my opinion, but that of the previous Governor of the Bank of England, the late Lord George, who said of that period:
	"We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term."
	That approach led to 20% house price inflation when the consumer prices index was running at 2%, led to financial institutions such as Northern Rock offering 120% mortgages, and ultimately led to a run on a British bank and the financial crisis of 2007. Opposition Members might blame America, global markets, or even the fact that we are not in the euro, as ridiculous as that sounds, but this misguided belief, and the hubris of the previous Prime Minister in believing that he had ended boom and bust, helped to contribute to the banking collapse. It is fascinating that the shadow Home Secretary-or perhaps I should say the shadow shadow Chancellor-stated that the cause of the deficit was not the previous Government's borrowing, but rather the collapse of tax revenues. He failed to recognise that tax revenues based on rapid house inflation and excessive consumer credit are totally unsustainable.
	The failure of the previous Prime Minister's regulatory regime also contributed to the problem. It was clear in the early part of the decade that the UK had an unsustainable consumer credit funding gap: the IMF said so, as did the previous Governor of the Bank of England. The power to regulate had been transferred from the Bank of England to the Financial Services Authority and the Treasury, with an inadequate definition of roles and responsibilities. It was an absolute disaster, as was shown at the height of the Northern Rock crash, when Mervyn King was asked, "Who is in control?" and his answer was, "That depends on how you define 'in control'." The answer was that nobody was in control, and no one could see who was in control. One cannot have a third of a problem-one wants all of the problem or none of it. That was part of the difficulty.
	So where do we go from here? I am a firm believer in sound money. A sustainable banking system is one where lending policies are closely in sync with the projected economic activity of the people it serves, not driving them.

Alison McGovern: Does the hon. Gentleman recall, as I do, that the previous Conservative Government left the country with a deficit of 3.4% which was going towards ongoing spending, unlike the debt in 2008, which accorded with the "borrow to invest" rule? In relation to sound money, what does he think about that?

Andrew Bridgen: I thank the hon. Lady for her point. She, like me, was not in this place at that time. I was in business running a corporation. I fixed the roof while the sun was shining, and I put my company into net credit three months before the banking crash happened.
	We need a Government-and a regulator-who do not deliberately go to sleep at the wheel for political advantage, as the previous Government did. We must never let a bubble like the one that built up under the previous Government build up again. Our plan for growth depends on a sensible and sustainable banking system alongside more powerful incentives from Government. We must never return to the bubble that ended in the financial crisis and allowed banks to lend unsustainably under a tick-box regulatory system and a short-termist, feckless Government concerned more with political advantage than with the long-term interests of the country. In short, we need to look at creating a body that is solely in charge of financial stability and has responsibility for macro-economic supervision.

John Mann: It would be tempting to go into some detail on derivatives. Indeed, I have written a public paper about what should happen with over-the-counter derivatives, but suffice it to say that, for the purposes of this debate, I wholeheartedly support the proposal put forward by my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), which is part of the solution. The concept that all derivatives could be exchanged in the way that he proposes creates complexity and is unsustainable, but the idea that there should not be large-scale clearing house involvement is of great importance.
	The opaqueness of the current situation spreads beyond the financial institutions into the largest corporations, which represent about 7% of a market that is specifically concentrated on this country. That is part of the meat of the issue, and it surrounds the financial crisis that we and the rest of the world faced. Very little attention has been given to this in recent times, or at any time since the financial crisis, but the principle must be one of transparency. Otherwise, we get insider trading-the sharing of information. Whether it is done legally because laws are not strong enough or illegally, there is an imperative towards insider trading because it is so lucrative. This opaqueness is fundamental to the problems that we have had, and we have seen it in other sectors such as insurance.
	That opaqueness, together with huge bonuses-however they are described by the industry-will lead to people making unsubstantiated claims and reckless gambles. If they have no personal liability-in other words, if they are gambling with other people's money-which is precisely the problem we had in the run-up to the financial crisis, then there is no comeback, and banks can go out of business. We have seen that with the biggest banks, including Lehman Brothers. One day, the executives are seen scuttling out with their files, and the next day-or perhaps a year or two later-they are coming back into the financial world with more huge salaries and huge bonuses: ever onwards, ever upwards. That is the mentality that underpinned the crisis.
	It is not only I or my right hon. Friend the Member for Oldham West and Royton who have this problem but the head of the stock exchange, who said to the Treasury Committee, in relation to the lack of clearing houses and the risks involved, that we are potentially sowing the seeds of the next financial crisis. The conflict between the stock exchange, and others who backed it, and the Government needs to get greater public exposure because it is fundamental to the Government's weakness in failing to understand that instead of short-term remedies, the creation of transparency is fundamental to the solutions we need.
	There were three major problems in the financial crisis. First, we have heard about people living beyond their means-well, the people who were living way beyond their means in this case were those in the financial institutions. That was not properly recognised at the time, or properly regulated. They were borrowing money against something they did not have-a hope, an expectation, a guess for the future, presuming that it would come right in the end-and of course they were personally incentivised so to do.
	Secondly, there is off-shoring. We have not done enough in this House-I am critical of the previous Government in this respect, as well as the current one-to deal with the British dependencies that are fundamental to the opaqueness of off-shoring. We can do a significant amount about that.
	Thirdly, the big investment banks are ferociously competitive in some areas and form an oligarchy in others. They allow no real competition and dominate with their excessive fees and powers. If we get on top of that, the House and the Government-whichever party is in power -will be able to avert future financial crises. If we fail to do so, the next crisis, whether it is in the short or medium term, could hit us just as ferociously as the last.

Mel Stride: I rise to speak against the motion, not least because of the argument made by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) that implicit in the motion is the suggestion that the Government have done nothing to avert a future banking crisis. I also believe that the motion is too prescriptive at a time when these matters are being considered in detail, not least through the Sir John Vickers commission. This Government set up the commission and released its issues paper as recently as last September.
	Huge complexity, tensions, conflicts and dangers are inherent in the development and implementation of policies that are designed to stabilise the banks. Many hon. Members have spoken about banks being too big to fail. It is true that if we have banks that are too big to fail, there is moral hazard in the actions of those who run them, because they always know that the taxpayer is there to back them up if necessary. In such situations, there is an element of unfair competition in that larger banks, backed by the taxpayer, can afford to take larger risks. However, we are also told by many in the industry that size is a function of competitive advantage and that being big is important in global markets.
	Many hon. Members have rightly mentioned capital asset ratios. It is important that banks strengthen their balance sheets and that Basel III is implemented, yet there are inherent dangers even in that. PricewaterhouseCoopers has estimated that the implementation of Basel III in the UK will result in £600 billion put into increased capitalisation, which could in turn reduce growth by between 1 and 2%. I therefore welcome the fact that Basel III will not come into full effect until about nine years' time.

Matthew Hancock: Does my hon. Friend think that it is inconsistent to argue both that the banks should lend more to small businesses and that the improvement in capital ratios should be speeded up, as we have heard from some hon. Members?

Mel Stride: That is precisely my point. If we speed up the rate at which the banks have to recapitalise, there is a real danger that we will choke off the supply of lending. There is an argument that lending is not just about supply, but about demand. Companies are not taking up many existing bank overdraft facilities, so it is conceivable that there is an issue with demand, as well as with supply.
	We have heard a great deal about the importance of united global action. In an internationally competitive world, there is such a thing as regulatory arbitrage. If one jurisdiction adopts a particularly light approach to regulation, vast sums of money can flow in that direction. However, as the Chancellor of the Exchequer has pointed out, our country needs to retain flexibility to reflect the particular conditions in our banking markets.
	I agree with many of the comments on the importance of transparency in corporate pay, and in particular bonuses. I accept that because banks can ultimately turn to the state and the taxpayer for support, we have a right to take an interest in that matter and to see that fair dealing prevails. However, I concur with Sir David Walker's recommendation that we should act in a united way globally so that we do not disadvantage countries that might move on their own.
	We have heard very little about taxation on banks. I congratulate the Government on being the first to introduce a permanent tax on banks. However, the arguments about taking out capital that banks might otherwise lend also pertain to that measure. We want the banks to lend more, but the picture is not clear as to why they are not lending, as I alluded to in response to my hon. Friend the Member for West Suffolk (Matthew Hancock). It may not be just a lack of supply owing to recapitalisation and a greater aversion to risk among the banks, but to do with a lack of demand among companies, many of which are focusing on paying down debt, rather than taking on more.
	My hon. Friend the Member for Orpington (Joseph Johnson) and the hon. Member for Bassetlaw (John Mann) mentioned competition. This country has a highly concentrated banking sector and it became more concentrated after the financial crisis, when some foreign lenders withdrew and some banks amalgamated. Lloyds and RBS make up 50% of lending to the retail, mortgage and small and medium-sized enterprises sectors. That is a huge degree of concentration. There are high barriers to entry to banking, not least the very regulation that we are discussing. Over the past century, the only new high street bank, disregarding demutualisations, has been Metro Bank, which was created last year. On the other hand, Australia and Canada have highly concentrated banking sectors and seem to have been spared the worst of the financial crisis.
	I welcome the Government's approach to Basel III and their setting up of the Financial Policy Committee, along with its oversight role in relation to the Bank of England and the Financial Services Authority. I particularly welcome the setting up of the Independent Commission on Banking under Sir John Vickers, which has been welcomed broadly by business, including in a recent speech by Richard Lambert, the director general of the CBI. I welcome some of the approaches that the Government are taking to encourage equity finance to increase above the current level of 1 or 2%.
	I fear that stalking the perimeters of the debate on the Government side and perhaps at the heart of the debate on the Opposition side is the idea of bashing bankers and of revenge. The hon. Member for Streatham (Mr Umunna), who I think is no longer in the Chamber, denied that that was what he said. However, when he was speaking, I jotted down his reference to bankers being "to blame". That is the kind of populism that we must get away from; emotionalism must not triumph over the rational when we consider such issues.
	This is a highly important sector in which we have a world-leading position and we must retain that. Protectionism, trade imbalances and exchange rates are threats, but I argue that we must not lose momentum on banking reform, particularly in countries that have not been as swept up in the crisis as we have, for what has bitten us may yet come round to bite them.

Sheila Gilmore: I speak not as somebody who has a banking background, but as somebody who represents part of a city that built much of its prosperity over the past 20 years on the financial services sector. I was encouraged and pleased to see many large banking organisations making their headquarters in the city and am hopeful that we will retain as possible, although there is a risk in such a situation as this that we may not. That industry has been extremely important for the city and has stimulated many other industries, not least property and construction. However, as we have seen, there are clear dangers in becoming over-dependent on the financial sector, as opposed to other parts of the economy, and we must reflect on that.
	Like all Members, I represent people who were baffled by a lot of what happened, and who remain baffled by what is happening. They feel that whoever is responsible, we have gone wrong somewhere in how we deal with what should be fairly simple matters such as how we can borrow and lend, and grow our economy. Although it might be naive to think that we could return to the simplicity of savings and loans organisations such as that featured in the film "It's a Wonderful Life"-it is a good time of year to think of that-we do need to return to some of the variants of financial services that we appear to have lost.
	In the rush to demutualisation, with nearly all the building societies being turned into banks, we lost something very important in the sector. That has left a lot of distrust among many people. We talk about encouraging individuals to put their trust in saving, which is important for aspects of our economy, but many people do not have the faith and trust to do that. That cannot be healthy. It would be helpful if there were small and medium-sized organisations in which they had that trust.
	I echo the view of my hon. Friend the Member for Streatham (Mr Umunna) that we have an opportunity to reconsider the mutual path when banks cease to be owned by the taxpayer. Those banks can go down a different road from the one that they have trodden. I hope that we will be able to consider that, because it would be healthier and better to have variety in our banking sector.
	We hear many different views about whether there was too much or too little regulation. From the perspective of the consumer of banking services, it sometimes feels as though there were a lot of regulation of little things and not enough of the big things. When I get another letter from the bank to tell me about some small change in interest rates, or not even that, I feel that things have gone too far, especially when it is accompanied by a big booklet that, frankly, I do not read. I am sure most people do not. That is regulation taken to its extreme. Equally, however, it cannot be right that an organisation such as the Royal Bank of Scotland, which is of great importance to my city and country, was able to become so full of its own importance that it could decide to buy into ABN AMRO, which was the cause of a lot of its problems, without someone saying, "Stop. Halt. You can't do this."
	Similarly, on the whole question of remuneration and bonuses, the ordinary person does not feel that what is happening is right or fair. They want us as parliamentarians to take a strong view on the matter. This debate is important, because there has been what some people would find a surprising degree of agreement and consensus that action needs to be taken. We need to translate that into not just a Back-Bench debate but Government action. If we do that well, we will restore people's trust not just in banking but in politicians.

Steven Baker: Like other Members, I welcome this debate and congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on securing it. I will oppose the motion for two reasons. First, I believe that the Government have acted briskly within the terrain of the current debate. I will speak about that terrain, because I believe it should be moved. Secondly, I should like to challenge the notion that we should have a clearing house for over-the-counter derivatives.
	I believe that the question of whether a clearing house should be provided, and under what circumstances, is a matter not for legislators but for the market. The problem with derivatives is accounting rules that allow profits to be recognised many years in advance, and that substantially reduce the capital requirements for derivatives in comparison with loans. That, of course, is inflationary in itself, stoking the activity that has caused the problem.
	Not only has regulation of derivatives been of poor quality, but derivatives are susceptible to regulatory arbitrage. Indeed, as was mentioned earlier, financial institutions employ large teams of very intelligent people specifically to construct derivatives to arbitrage away the regulations that are put in place. A clearing house would obfuscate counterparty risk, with unintended consequences, and, as clearing houses always do, it would reduce the demand for cash balances in banks, thereby promoting inflation. For all those reasons, I believe it falls to us as legislators to create the right environment for banking, based on property and contract, not to mandate any particular solution such as a clearing house.
	To challenge the terrain of this debate, I should like to take the House back to a landmark in the development of British monetary and banking orthodoxy-the Bank Charter Act 1844, also known as Peel's Act. It represented the victory of the currency school over the banking school. The former had realised that systemic crises and banking collapses were largely attributable to the excess creation of fiduciary media-that is, claims on money not backed by a fund of actual money. The Act, introduced by Peel, therefore eliminated the practice of banks issuing their own notes. Unfortunately, the currency school had not realised the economic equivalence of notes and demand deposits, so the Act left the banks virtually unmolested in their ability to issue fiduciary media.
	My hon. Friend the Member for Bromsgrove (Sajid Javid) mentioned the wall of money that hit the markets, and we might reasonably ask where that wall of money came from. It has become common practice to say that interest rates were too low for so long, and therein lies the insight. When that happens, people are encouraged to borrow and the banks are encouraged to extend fiduciary media well in excess of real savings. Low interest rates ought to indicate prior production and real savings, but when central banks deliberately suppress interest rates and issuing banks pour fuel on the fire by issuing fiduciary media, what we find is that wall of money hitting the market. In our case, that money principally headed off into the housing market.
	At the heart of our difficulties is the fact that there was an omission in the 1844 Act. The deposit-taking banking system is built upon that Act and a body of case law, which have left the banks with the legal privilege of treating demand deposits as their own property. That allows the system as a whole to create a wall of fiduciary media. That is the heart of our crisis, but it is not part of the mainstream contemporary debate, and I believe that it should be.
	In the last minute of my speech, I should like to touch on some other issues that have not formed part of the debate, the first of which is risk management. The entire brilliant edifice of modern financial theory is built on the assumption that risk in markets follows a Gaussian distribution, but that is not true. Market events follow a long-tailed distribution, as Mandelbrot and others showed. I very much wish that risk managers would take that into account in their strategies.
	If we were to look more broadly at the money and banking system, and ask ourselves how we could characterise it, we would find central planning, legal privilege, the socialisation of risk, Government monopoly, complex regulations that are often arbitraged away and, of course, ad hoc intervention. We would not find clear property rights, freedom of contract and the consequences of bearing one's own risks.
	We have a lot to do in money and banking, but we must transcend the problem of blaming individual bankers. Yes, individuals have done much wrong, but the system is deeply flawed and we can trace its flaws back to the development of the British monetary orthodoxy. It is that orthodoxy that we must challenge.

Chris Evans: I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on introducing this debate. I do not know whether he remembers it, but five years ago he spoke in Gloucester about the economy-I was the Labour party candidate in Cheltenham-and warned that the banks were out of control. A lot of people looked on that uncharitably, but, sadly, he was proved right, which is why we are having this debate.
	The debate is important because there is great anger out there about bankers. No matter what Government Members say, people blame bankers. When I first came to the House, BBC Wales ran a profile of me, the last sentence of which was:
	"Since leaving university he's worked in bookmaking and in banking, which contrary to widespread belief are different professions."
	Yes, there is a difference. I come from a family of bookmakers -my father and my mother were both bookmakers-and the one thing that was drummed into me as I was growing up was risk. As bookmakers, we understood risks, which is why we had odds. We always knew what would happen if we could not cover our losses.
	When I joined the bank, naively I thought that I was joining an institution that I could be proud of and that set standards to which other industries could aspire. Unfortunately, I discovered that it was completely and utterly different from that. I was told to lend to whomever I could. I still do not understand the logic of saying to somebody who cannot afford to pay their bills every month, "Mr Customer, you need a £10,000 loan to get you through."
	I got a warning for refusing to lend someone £25,000 in an unsecured loan, because-I was told-I was not thinking about the shareholders. That is the major problem. When I said to my manager, "This can't go on. This is madness-we're just writing people off," he replied, "Son, it's a sign of the times. You wouldn't go into a shoe shop and expect not to buy shoes." However, there is a difference. A person who goes into a shoe shop and buys the wrong shoes will get blisters; a person who goes into the bank and buys the wrong loan loses their house. The people at the bank did not understand that we were dealing with people's lives. They were arrogant and blasé-"We can't fail; we're great banking institutions"-regardless of the Barings bank failure in 1991. I well remember the chief executive of Barings at the time saying, "It isn't terribly difficult to make money in the City, old boy," but the bankers ought to have learned that it is terribly difficult for builders and plumbers to earn money.
	The essential truth is that banking is simple-a bank lends money to someone and makes money through the agreed interest rate-but the banks made it complicated. In the debate this afternoon, I have heard about derivatives and arbitrage, but the average person who walks into their bank will think, "What relevance do derivatives and arbitrage have in my life?" The banks made lending into mathematical equations-someone mentioned a biology graduate-and sold debt on, so the money came from several different sources. Eventually, that massive tower block collapsed when the person at the bottom failed. I have been reading Ha Joon-Chang's "23 Things They Don't Tell You About Capitalism", in which he argues that we should ban complex financial instruments. That is an outrageous thing to say, but if bankers and economists do not understand such instruments, how can anybody else be expected to do so?
	Before I finish, I want to return to the anger that people feel. In an article in  The Sun today headlined, "Bank chiefs grab £15 million bonus", I read that Stephen Hester of RBS will receive £2.4 million, that Eric Daniels of Lloyds Banking Group will receive £2.3 million, that John Varley of Barclays will receive £3 million and that Peter Sands of Standard Chartered will receive £3.2 million. What message does that send to people? That money is absolutely obscene, including to people who work for those banks. I go back to my experience of working in a high street bank. We were kept on deliberately low wages. The only thing that kept us going was the promise of a bonus. They would say, "We want you to bring in so many leads so stay till 7 o'clock at night. Forget about your family. You've got to earn money and put some bread on the table boy."
	That is still going on. Someone came to my surgery the other day and said, "I have to work till 8 o'clock every night because I've got to speak to the people I did not speak to in the day. I've got to get leads." No amount of Government legislation or regulation will change that.

Andrew Bridgen: Does the hon. Gentleman not agree, however, that it is
	"the hope of reward that sweetens labour"
	for us all?

Chris Evans: For people earning £12,000 a year and struggling to pay the bills, the pressure is on to stay after work and phone up leads to earn a quarterly bonus just to get through. That is not right. They should be paid a living, decent wage, which is what the Opposition support. I hope that everyone else will eventually do likewise.
	Finally, as I said, no amount of Government regulation or legislation will change that culture. We need to say to the bankers, who were to blame for the economic crisis, "Either you change your culture, or the crisis will happen all over again." We had better start opening our eyes to that.

David Mowat: One of the odd things about this debate is that those of us who believe that structural reform of the banking sector is necessary are characterised as being anti-free market, anti-capitalist and anti-banking. I am none of those things. In fact, I believe in the necessity of such structural reform precisely because I am pro-capitalism, pro-banking and pro-free market. The case for some kind of firewall, along the lines of the one introduced by Glass-Steagall, is irrefutable. That will be considered by the Vickers commission over the next year but that is no reason not to discuss it here.

Mel Stride: Does my hon. Friend accept that the problems in Iceland and Ireland were caused solely by retail banks? The Lehman Brothers collapse presaged the financial crisis, but that was wholly an investment bank that never took a retail deposit.

David Mowat: I intended to address that later in my remarks, but I shall take it head on. Lehman Brothers was a bad bank and it rightly went bust. However, that affected a whole lot of other banks, which required massive Government bail-outs, because there was no firewall. Nothing in my remarks will imply that retail banks such as Northern Rock will never go wrong or need to be saved. Frankly, my hon. Friend's example makes my point rather than contradicts it.
	Two or three hundred years ago, capitalism was developed by joint stock companies, which was a clever and wonderful thing. If such companies made the right decisions and were wise, they prospered and grew. The other side of that was that companies failed if they made unwise decisions or mistakes, lost money, or failed to recognise risk-Gaussian distribution or not. In the past 15 to 20 years, unintentionally, a new type of company has emerged. Such companies are not subject to the same penalties for risk as other businesses. That creates moral hazards and poor decisions. In the end, that was a large contributing factor to what happened in this country two years ago.
	The arguments in favour of a firewall are overwhelming, but what are the arguments against it? The principal argument against a firewall has been the subject of the most intense banking industry lobbying imaginable, and I hope that when the time comes to legislate, hon. Members and the Government do not bow to it.
	The first argument is that such a separation implies that investment banking, derivatives and all that goes with that are casino-type activities and of less value to society. I do not think that at all. I sold my business to investment bankers, I like investment bankers and I understand why we sometimes need derivatives. I have no problem with those instruments, but I do have a problem with the fact that if the people using them mess up, they cannot go bust, because there is not a firewall between their activities and the rest of the banking world. That is the problem.
	The second argument was raised just now by my hon. Friend the Member for Central Devon (Mel Stride)-the Northern Rock and Lehman Brothers example. I will not repeat what I said, except to say that Lehman Brothers should have been allowed to go bust, but should not have been able to bring in billions of dollars of taxpayers' money after it, as it did.
	The third argument is that a firewall would be too complicated: banking has now got global and is so mixed up that we cannot separate out investment banking and retail banking. Well, we can. The Basel III agreement contains a requirement that the capital considerations for each part of the banking portfolio be different. That can be done.
	The fourth argument is that we can do all this with capital ratios and that if we impose them on banks we will not need this firewall, this separation. That is partly true, but actually they are not mutually exclusive-we need both-and, as was said earlier, capital ratios, unless we are careful, will shrink bank balance sheets and reduce lending at a time when we want more credit. What I am proposing would not do that.
	The fifth argument is that, if we did this in this country, in front of the rest of the world, it would put our banks at a competitive disadvantage. That might be true-it is a reasonable argument-but I would say two things in response: first, the banking sector in this country is about four to five times as significant, as a proportion of GDP, as it is in any other country, so we ought to be leading the world in this regard. It matters more to us. Secondly, even if the argument is right, it is not a reason for us not to try to get the world behind us, create these firewalls and get this under control.

Steven Baker: My hon. Friend makes a compelling case. Will he consider the case of fixed-rate products-fixed-rate savings or fixed-rate mortgages-because it seems to me that such products are bound to bring the savings and loans business into contact with the investment business, through interest rate swaps?

David Mowat: I thank my hon. Friend for that intervention. My third argument was that these things are all so complicated and mixed that we cannot separate them out in the way I propose. I made the further point, however, that we have to do that, under Basel III. However, as recently as 15 years ago, firewalls were in place, so it is not that difficult and it can be done, if there is the will. The requirement on moral hazard is such an overriding necessity of capitalism that when it goes, it is terribly dangerous. And it has gone now, which is the guts of what we have been talking about for most of this afternoon.
	I am not the only one saying that. Paul Volcker, who was previously head of the Federal Reserve, and John Reed-not the John Reid who used to sit on the Labour Benches, but the John Reed who used to run Citigroup-have asked for this firewall to be put back in place. The Governor of the Bank of England, too, said that of all the different ways we could choose to organise a banking system, the way we have chosen to do it in the UK is among the worst imaginable. We have to act on this. It is very important, and I hope that, notwithstanding the Vickers report, the Government will show leadership on this matter.

Matthew Hancock: I want to speak briefly at the end of what has been a very interesting and informative debate, which I commend the Backbench Business Committee on securing.
	I welcome some of the measures that the Government have already taken, so in the light of this debate, I hope that the motion, which states that the Government have taken no action, will not be pressed to a vote. Many Members have accepted that the measures on tax, including a permanent tax on banks, the Vickers review into banking structures, the international push for transparency and the action taken to bring banks together to work on bonuses show that a strong work programme is in place already.

Michael Meacher: I do not want to take up time, because I have a couple of minutes at the end of the debate, but the hon. Gentleman picks up on a point I was going to raise. I did not say that no action has been taken. My motion states that
	"no action has so far been taken which would prevent a recurrence of the financial crash".
	That is a very different proposition.

Matthew Hancock: I thank the right hon. Gentleman for that intervention, because it brings me precisely to the final thing that the Government have already proposed, and which I think is central to preventing a recurrence of the financial crash: the decision to move the powers for prudential regulation to the Bank of England and to strengthen those powers.
	Having quickly welcomed the action already taken, I want to concentrate on prudential regulation. The removal of powers of prudential regulation in 1997 was central to many of the things that Members on both sides of the House have talked about. The hon. Member for Islwyn (Chris Evans), who is not in his place, spoke passionately about how his managers were telling him to lend more no matter what the customer needed. That was part of the rapid expansion of banks' balance sheets, because there was no prudential regulation at the top of the size of those balance sheets. We also heard, from Government Members, about the rapid, uncontrolled run-up in balance sheets.
	The idea of prudential regulation and having an institution exercising judgment, instead of just lots more rules-based regulation, has come of age. After all, the system before 1997, although imperfect, had prevented a run on any bank in the UK for 140 years, so it deserves some credit, and it deserves studying. So why would more discretion and judgment based in strong institutions work better than more rules? There are three key reasons. The first, as we have heard in many contributions, is that although rules can be set down in statute, statute can take a long time to change, whereas bankers can change and adapt very quickly. We have heard a lot this evening about regulatory arbitrage-another example of how financial institutions will change quickly to make the most out of whatever rules have been put in place on the ground. But the system cannot then adapt quickly.
	Secondly and crucially, the system cannot adapt to innovations. We have seen massive financial innovation, especially with the development of computers over the past 30 years. However, to blame that innovation itself for the mess we are in ignores the fact that it was the lack of regulations-as my hon. Friend the Member for Warrington South (David Mowat) pointed out so eloquently, regulation is crucial to a functioning market economy-around these new developments and the attempt to regulate through explicit and specific rules, rather than the exercise of judgment, that was the problem.

Stephen Barclay: Is not one issue that mitigates the need for specific rules the regulator's 11 principles, which act a bit like the 10 commandments? For example: "Principle 1: you must act with integrity. Principle 11: you must be open with the regulator. Principle 3: you must have adequate risk management." It is inconceivable, given that those rules have legal force, that some of those catch-all principles could not be used in enforcement.

Matthew Hancock: They were not used, and that is the problem. A massive, heavy and expanding rulebook distracted the attention of regulators away from the big picture.
	My third point about why discretion rather than rules is the best way for the future concerns the importance of the macro-economy, because we cannot separate monetary policy from banking policy. The size of banks' balance sheets is crucial to regulating the supply of money in the economy. Having counter-cyclical rules rather than pro-cyclical capital rules, as we had under Basel II, is crucial. The exercise of judgment over a bank's balance sheet is best done in the same place as the exercise of judgment over the macro-economy. Bringing those two things back together in one institution-the Bank of England-is a better long-term way of trying to wrestle with such difficult judgments than having them in separate organisations, which, as we heard in an earlier, eloquent speech, ended with the tripartite system, in which nobody was in charge.

David Rutley: I do not know whether my hon. Friend is aware of this, but last week the deputy Governor of the Bank of England appeared before the Treasury Committee and said that he felt that the new twin peaks approach would be a much better model. He felt that the advantage was that it would remove the problems of underlap that were so obvious in the previous system. Whereas there might be some overlap under the current proposal, that has to be much preferable to the previous arrangements.

Matthew Hancock: That is a valid and important point. Central to that point is the judgment of people who look forward and have a broad view, looking after the health not only of the banking system, but of the macro-economy, while also having the ability to change the way they regulate according to changes in the economy, so as to take into account new developments, which is critical. Far from being the simple renaming of the institutions, bringing together macro-prudential regulation with regulation of the economy and monetary policy more broadly is central to restoring the ability to prevent the build-up of credit, as happened over the past 15 years.

Andrew Bridgen: Does my hon. Friend agree that it is better to have a regulator who is fleet of foot than a clunking fist?

Matthew Hancock: In my experience it is always better to be anything than a clunking fist.
	I will end by saying this. We do not know what the future holds. We know that regulation is not perfect. It is therefore far better to have one person and an institution in charge of the regulatory structure who can exercise judgment to the best of their ability than it is to try to write a rulebook for a perfect system that we know we will never create. That is why I think that the Government have already put forward such a critical change to our financial architecture-a change that I hope will be accepted by the Opposition and which will form the basis of the good economic governance of our country for years to come.

Lindsay Hoyle: I call Mr Morris. Are you going to be very brief?

David Morris: I am going to make only a two-minute speech, Mr Deputy Speaker.
	This debate has touched a lot on the technicalities of how the banking system works, but I echo the passionate and eloquent speech by the hon. Member for Islwyn (Chris Evans). Commercial banks on the high street do not all operate between themselves in the same way. There are different clearance rates. Cheques can take up to 10 days to clear, which can put families who are in hardship even further into hardship. In the banks' eyes, banker's transfers do not occur on the same day, or even over four days. For example, one of our high street banks-one that is more or less state-owned-will take money out of a person's account instantaneously, but it will take over four days to transfer that money into another account in the same branch. I have a constituent who has a problem in that he paid off his credit card over the counter in a national high street bank, but was told that it would not be credited instantly and that this would take up to six working days. That is outrageous and should be touched on in the reforms, so that each bank is streamlined with the others. In many countries in Europe, such as Sweden, transfers are seamless and instantaneous. I would like the House to consider that.

Christopher Leslie: I, too, congratulate the Backbench Business Committee and my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on setting up this thoughtful and well-tempered debate. A number of good ideas have been shared among all parts of the House. In fact, there has been much more consensus between the Back Benchers on both sides of the Chamber than between the Front Benchers. We will see whether policy can be shaped by the virtues of our debate, because there has been quite a lot to take away from these discussions.
	It is important to reflect on the wide-ranging set of reforms needed to bolster our banks against a repeat of the credit crunch and, as we all want eventually, to create a financial services industry that is sustainable and diverse, and that serves the best interests of both savers and borrowers. There are a number of significant systemic reforms that it is important to reflect on. I shall touch on many of the comments that have been made, but the first point is to look at the motion that is before us. As we can see from the Order Paper, the Government and the Opposition each tabled an amendment to the motion, although neither of us were fortunate enough to have our amendment selected. For our part, although we agree almost entirely with my right hon. Friend, the element in the motion touching on derivatives requires a little more thought.
	Many commentators have rung alarm bells about the swirling volumes of derivatives activity in the past decade, with multi-trillion dollar flows and British banks holding at least £l trillion in derivatives. However, derivatives are, for good or ill, a reality of the modern global economy whereby companies and other investors gain exposure to an underlying asset or offset their exposure to that asset without actually buying or selling that asset in the first place. Derivatives are supposed to be designed to reduce risk and volatility for companies, employees and consumers. For example, an airline can hedge-or insure itself-against volatility in fuel prices by taking out a futures derivative, thereby offsetting its exposure to price changes. However, as my right hon. Friend and others have said, the problem is that betting on the future prices of financial assets has proved irresistibly alluring to traders and bankers, who can make billions off the back of this market without having to own the assets on which they are gambling.
	There is therefore quite an irony in the fact that products that are intended to help alleviate risk have in many ways massively increased the systemic risk to the economy. Add to that the sheer complexity and opacity, as many hon. Members have mentioned, of some derivative products-collateralised debt obligations-squared, and so forth-and we end up with companies holding derivatives positions that their own management do not understand, failing to appreciate the risks involved. That is why the history of recent collapses has been intricately tied to that problem-including at Bear Stearns, Lehman Brothers, AIG, Long-Term Capital Management and even Barings-yet we have still not properly grappled with it.
	The reason why we on the Opposition Front Bench cannot quite support my right hon. Friend's motion is that it essentially calls for an end to over-the-counter derivatives trading and the introduction of a central clearing house. I can see the attraction of that-the standardisation of products and the stronger likelihood that the regulator could peer inside and comprehend the nature of the risks involved-but the downsides are that derivatives could not be easily tailored to the specific needs of the buyer. With the vast majority of derivatives currently privately traded between two parties, the consequences of that structural requirement for exchange trading in all circumstances could be disadvantageous. For instance, could there be a constraint on the specific maturity of the futures options? Would we be unwittingly re-injecting risk into the economy by constraining the ability to hedge responsibly?
	The Opposition need, however, to recognise the urgent and far-reaching reforms that are required. Do we need an urgent and thorough review of derivatives and policy on them? Yes, absolutely: both regulators and markets need more transparency in over-the-counter derivatives activities, particularly given the possibility of greater exchange trading. By the way, we also need greater scrutiny of the role played by the credit rating agencies, as the hon. Member for South Northamptonshire (Andrea Leadsom) and others said, given that they have blessed many products with triple A ratings that did not necessarily translate into reality. Should we require greater registration and transparency in these over-the-counter deals? Yes, absolutely. There is too much secrecy, and the consequences for the taxpayer are ultimately too great.

John Mann: I am just trying to get my head round my hon. Friend's statement that there should be greater exchange trading of derivatives. Precisely how does he think that that should be enabled?

Christopher Leslie: We do not necessarily need to end all bilateral trading of derivatives, but to pick up where the G20 in Pittsburgh left off in 2009. It resolved to move towards greater exchange trading, but not necessarily the end of all over-the-counter trading. I know that we disagree on this specific point in the wording of the motion, but it is important that we should be responsible when considering some of the reforms that are being suggested. It is good that the Backbench Business Committee has enabled this debate to take place today.
	I have doubts about the Government's policy on this because they are leaving it very much to the European institutions to lead on this matter, and leaving it up to the European market infrastructure regulations, which are now emerging as the only likely vehicle for reform. It is striking that Ministers are happy to be led, rather than showing leadership on this matter themselves, especially as the UK financial services industry is at the forefront of many of these activities. I urge Ministers to be far more front-footed on these reforms, rather than hanging back and complaining that details and policy are being foisted upon them.
	We also need to consider some of the other regulatory shortcomings that have been raised in the debate, including those relating to bonuses, to management incentives skewing the behaviour, and to transparency. I do not want to be too partisan, but I find certain aspects of this situation astonishing. My hon. Friends the Members for Streatham (Mr Umunna) and for Leeds East (Mr Mudie) said that the Government needed to show more leadership on banker remuneration. We have seen the appalling confusion and weak will of Ministers even over listing the number of bankers earning more than £1 million. Even that seems to have been a difficult step for them to take.
	It is a particular shame that the Business Secretary is not here tonight-at least we have a couple of Liberal Democrats representing him here-especially as he was so vociferous on this subject exactly a year ago in his article in the Daily Mail . He described the proposal to disclose simply the number of bankers earning more than £1 million as a "whitewash", saying that it would represent only "a small advance". He went on to say:
	"Shareholders who own the banks and the taxpayers who guarantee them have every right to know who is being paid how much and for what...Directors of public companies are already required to declare their earnings...The failure of Walker to grasp this is compounded by Alistair Darling's meek acceptance of his recommendations. There are splits in the Government...Taxpayers sign the bankers' bonus cheques, so we must see the names and numbers on them."
	We clearly do not need to wait to see the Business Secretary's appearance on the Christmas special of "Strictly Come Dancing"; he is perfectly able to perform his volte-faces, somersaults and U-turns one after the other. He is performing spectacular political cartwheels more often than ever before.

Stephen Williams: rose -

Christopher Leslie: I would love to hear what the Liberal Democrats have to say about this.

Stephen Williams: Let us see whether the hon. Gentleman can pirouette his way out of this one. During the last Parliament, probably the largest piece of legislation that went through was the new Companies Bill. Given that my right hon. Friend the Member for Twickenham (Vince Cable) called at that time for more disclosure in companies' reports about directors' remuneration, why did not the previous Government rectify that anomaly?

Christopher Leslie: It is difficult for the hon. Gentleman to criticise the previous Government, when they put the statute in place ready to be triggered by the present Government. It is baffling to my constituents and to his that we cannot allow them to see the simple figure of how many multi-millionaire bankers there are. I am not suggesting that we reveal their names, just the number involved.

Matthew Hancock: rose -

Christopher Leslie: I am hoping that the hon. Gentleman is going to concede that that needs to happen.

Matthew Hancock: The hon. Gentleman is making an argument for rejecting the Walker review. I was not in the House during the last Parliament. Could he just tell us who commissioned the Walker review?

Christopher Leslie: I am not making an argument for rejecting the Walker review. It recommended the disclosure of the numbers, but it is true that Walker has since changed his tune. The reliance on what he calls "regulatory arbitrage", and the suggestion that if we were to make that change here in the UK alone, we would suddenly see an exodus of the banking community, are absolutely fallacious arguments. We have a responsibility to show a lead, and surely the Government should be able to do that. It would be invidious if that were not the case.
	In the short time available to me, I also want to walk through some of the other proposed changes that hon. Members mentioned. They raised issues about proprietary trading, and there are even more Government Members who are in favour of the Glass-Steagall split between investment and retail banking. There has been an interesting consensus on that. That might not necessarily be the right thing to do, but it is certainly worth consideration by the Vickers commission.
	The structure of the sector has also been mentioned, as has the question of whether we need to revisit the issue of competition. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) asked how we could remove some of the constraints on mutuals and credit unions, and on others entering the sector, given that the barriers to new entrants are too high. Indeed, I note the very thoughtful speech from the hon. Member for South Northamptonshire (Andrea Leadsom), who mentioned a number of interesting ideas about how reforms might take place. I was quite taken by her suggestion about consumers' current account numbers being portable. Other interesting suggestions were also made.
	Basel III and the question of cushions and reserves are clearly important for guarding against failure and reducing taxpayer liability, but do we need to pay similar attention to liquidity, as the hon. Member for Bromsgrove (Sajid Javid) and my hon. Friend the Member for Wirral South (Alison McGovern) suggested? Should certain institutions have greater cushions and reserves than others? Perhaps that is the subject for a more sophisticated debate at another time.
	Other components have to be addressed as well, including the financial capability of consumers and consumer responsibility. Yes, consumers have a right to know more about the products and companies involved, but perhaps it is also important to have a debate about the responsibilities of consumers. That needs to be acknowledged. We need to revisit the question of fairness for the taxpayer, and for public service users, indirectly, as well. Unfortunately, we have heard too much back-pedalling on the banking levy and on the role that the banks need to play in repairing the public balance sheet- [ Interruption. ] The Minister suggests that he is not back-pedalling, but from what we read-albeit in the newspapers-it sounds as though the Government might reduce the percentages that they want to implement, as announced in the Budget, if they are going to stay within the proposed 0.04% in year one and 0.07% thereafter. I would be more than happy to give way to the Minister on that specific point if he wants to clarify that position once and for all. But perhaps he will keep that for another day. He has also been back-pedalling on net lending targets of the business, although that was in the coalition agreement.
	It is important that we have these debates. They show that there is a thirst for democratic accountability on financial services policy. Perhaps one of the lessons that we learn is that simply delegating many of these issues to European institutions or to the regulators is inadequate. There is a democratic deficit, and Parliament has a role to play. Hon. Members who try to find out information on Financial Services Authority reforms and regulations sometimes struggle to get the necessary documentation from the Vote Office, which is not good enough. We need to recognise our role as legislators, because our constituents are watching how we behave. They are watching how we set policy, and they expect us to do that. We should not be blown around entirely by the regulators, by Europe and by the markets. Politicians need to lead, and Ministers need to show greater leadership, and I hope that the Government will do that.

Mark Hoban: It is a pleasure to take part in this debate, and I congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on securing it. I would like to pick up on one point that was raised by the hon. Member for Nottingham East (Chris Leslie) when he talked about the Government showing leadership. If I remember rightly, it was his party that said before the election that we could not introduce a banking levy on a unilateral basis. This Government have introduced such a banking levy, and it will raise £2.5 billion in a full year. That is what leadership is about. All that we have heard from the Opposition is that there is more disagreement on policy among the Front Benchers than among the Back Benchers. The problem is that the debate showed that those Back Benchers had more policy than the hon. Gentleman. Nothing in the 15 minutes for which he spoke told us anything about the future direction of the Labour party on the regulation of the financial services sector, other than his vague attempt to justify their decision not to vote for the motion. The right hon. Member for Oldham West and Royton has been hung out to dry yet again by his Front Bench.
	It is vital that we learn and act upon- [Interruption.] I ask the hon. Member for Streatham (Mr Umunna) to let me continue. He will have his chance tomorrow in the Treasury Committee. It is good to see that the Leader of the Opposition's parliamentary private secretary is already revving up for that experience.
	It is right for us to learn the lessons of the financial crisis, and to act on them. We must think very carefully about the range of interventions that we make. It was clear from everything that was said today that a range of measures was needed. The hon. Member for Streatham himself said that there was no magic bullet, and that is true. We need to take a range of measures domestically, in Europe, and at G20 level, if we are to learn those lessons of the financial crisis.
	Let us begin with what we should be doing at home. We know that the regulatory architecture introduced by the last Prime Minister was fundamentally flawed. As my hon. Friend the Member for West Suffolk (Matthew Hancock) pointed out, he took away the Bank of England's responsibilities for the regulation of banks. The Bank had the ability to spot threats to financial stability, but it lacked the power to tackle them. The last Prime Minister gave the FSA a dual mandate, which focused on the conduct of business to the detriment of prudential supervision.
	Unlike the last Government, we have decided to reform the architecture and the approach to financial regulation, and to implement a structure that works. Before I outline the institutional reforms, let me set out the new approach that we want regulators to adopt. We believe that whether the problem is a threat to financial stability, a flawed business model or the mis-selling of financial products, regulators should intervene decisively and early to minimise its impact on our economy, on financial stability, or on consumer outcomes. The regulators will be required to demonstrate judgment and discretion, which represents a big change in attitude and approach.
	However, we do not think that it is enough simply to change the approach; we want the architecture to change as well. We will establish a financial policy committee in the Bank of England with a dedicated focus on macro-prudential analysis and action, to ensure that risks that develop across the financial system as a whole are identified and responded to when that did not previously happen. The FPC will have a strong mandate to protect financial stability, with credible and knowledgeable external membership. It will be able to challenge the prevailing consensus, and to ensure that potential risks are identified, monitored and addressed rather than being ignored, as they were under the last regime.
	The new architecture will also ensure that macro-prudential regulation of the financial system is co-ordinated effectively with the prudential regulation of individual firms, and that a new, more judgment-focused approach to regulation of firms is adopted so that business models can be challenged, risks can be identified, and action can be taken to preserve stability. That will be the responsibility of the new prudential regulation authority, which will be an independent subsidiary of the Bank of England.
	However, it is not just a question of prudential stability. As a number of Members pointed out today, we also need to reform the way in which we look after the interests of consumers. We will set up a consumer protection and markets authority with a primary statutory responsibility to promote confidence in financial services and markets. Regulation and conduct within the financial system, including the conduct of firms towards their retail customers and the conduct of participants in wholesale financial markets, should be carried out by a dedicated, specialist body with focused and clear statutory objectives and regulatory functions.
	As I said earlier, it is also not just a question of regulation. We need to think about the structure of the banking system. It was the last Government who closed down the debate about whether the activities of universal banks should be divided between investment and retail banking. We had the courage to open that debate, which is why we have established an Independent Commission on Banking, led by Sir John Vickers, to examine the structure of banking in the United Kingdom, the state of competition in the industry, and how customers and taxpayers can be sure of the best deal. The commission will consider issues of systemic risk and moral hazard, and will examine the complex issue of separating retail and investment banking functions, which was raised by Members on both sides of the House. It is due to deliver its report to the Cabinet Committee on Banking Reform by the end of September 2011, and its findings will help to shape the UK's banking sector for decades to come.
	One of the issues that have been a focus of international debate is linked to the work of the independent banking commission. Recent interventions have reinforced perceptions that some institutions in particular are too big or too important to fail: the so-called systemically important financial institutions, or SIFIs. They pose a much greater risk to taxpayers and to the efficient working of markets. We believe that it is vital for us to eliminate that source of moral hazard, and to ensure that it is possible to resolve failing firms without triggering a systemic crisis or requiring support from taxpayers. The Government are taking an active role in the G20 and in the Financial Stability Board's work on the development of a robust, internationally consistent policy framework to address SIFIs and the risks that they pose. We fully support the principle that they should be required to have a higher loss-absorbency capacity than other institutions.
	That is just one sphere in which international co-operation is needed. We recognise that financial stability cannot be achieved by any one country operating in isolation. The UK has a commanding position in international financial services, and the industry is global in character. It is therefore vital that we co-ordinate our actions with our international partners to ensure that we have effective means for dealing with threats as they arise. We have consistently argued for strengthened international financial regulation to address the failings that were laid bare by the crisis, and huge progress has been made in strengthening international regulatory standards. Getting these reforms right is vital for financial stability, but it is also vital for the future of our global financial services sector.
	Capital was mentioned frequently during the debate. During the crisis, we learned that the banking system lacked the capital that was needed to absorb losses, or the liquidity that would enable it to survive when markets closed. We have been a vocal supporter of the G20's endorsement of the Basel committee's reforms to strengthen international capital and liquidity standards. Banks will be required to hold more capital to withstand losses, with the buffer of 2% core tier 1 required under Basel II being replaced by a buffer of at least 7% by 2019. I think that the long transition period gets the balance right. It strengthens the banks' capital position, but at the same time ensures that banks are able to lend and continue to sustain economic recovery. I believe that this crucial set of reforms will strengthen the resilience of the banking system to the long-term benefit of the economy.
	The motion refers to derivatives. I think that the hon. Member for Nottingham East and I agree on one point. I believe that neither of us will support the motion, but we have learnt through the crisis that over-the-counter derivatives in particular lacked transparency and created a complex web of interdependence between the bilateral contract parties, which made it difficult to identify the nature and level of risks involved. The financial crisis has demonstrated how those characteristics increased uncertainty in markets in times of stress, and posed risks to financial stability.
	Notwithstanding the comments made by the hon. Gentleman, the UK has shown strong leadership in reforming the derivatives markets. We have continually called for more transparency and central clearing of OTC derivatives. Internationally through the G20 and the Financial Stability Board, and in Europe through the European market infrastructure regulation, we are implementing vital reforms that will address the shortcomings evidenced by the crisis in the derivative markets.
	The right hon. Member for Oldham West and Royton has proposed that the Government should establish a clearing house for approval of all financial derivatives. However, in the crisis, the private sector clearing houses successfully unwound the positions of defaulting members. Their prudent risk management meant that they did not need assistance from the public sector, despite being directly exposed to failing institutions such as Lehman Brothers. We therefore believe that clearing houses as private sector entities are able to manage risk effectively, but we also believe that central counter-parties should be bound by high standards given their systemic importance, and that those standards should be harmonised on an international basis. The Government are committed to ensuring that that happens.
	The main aim of our reform should be the reduction of systemic risk in the financial sector. It should cover derivatives only when central clearing will indeed bring a reduction in systemic risk. Corporate end-users that trade derivatives purely for the purposes of hedging, as opposed to speculation, will be exempt from the clearing obligation. That will reduce the cost that will be passed on to their customers. I reject the arguments in the motion.
	The motion tabled by the right hon. Member for Oldham West and Royton fails to recognise the action that we have taken to reform financial regulation at home and abroad. We have done more in the past seven months than our predecessors did. We are building a new financial regulatory architecture and approach. Banks will hold higher amounts of capital so that their shareholders, and not taxpayers, will bear the losses when the next crisis comes. International reforms must strengthen financial stability, but they should be proportionate and should not choke off economic recovery.
	Over the past few months, this Government have led the debate on financial reforms both at home and abroad. We are taking the action that is required to create a much more sustainable and stable financial system, and if the motion is put to a vote, I will urge my hon. Friends to oppose it.

Michael Meacher: I was astonished to hear the Financial Secretary say he thinks that the regulation of financial derivatives in the last financial crisis was adequate, since it seems to me to be clear that that was not so.
	This has been one of the most thoughtful, high quality and rewarding debates I have taken part in, or heard, in the House for a very long time, and we must thank the Backbench Business Committee for bringing a new tenor of openness and genuine discussion into debates, rather than adversarial confrontation.
	For Members who may be considering how to vote, let me state once again that I did not say that no action has so far been taken by the Government; I think they have taken action. I said that no action has so far been taken that would prevent a recurrence of the financial crash, and simply shifting regulation from the Financial Services Authority to the Bank of England is certainly not going to achieve that.
	I took a brief note of the most important points made by each Member who contributed to the debate, and I was astonished at the high measure of agreement-I will not say consensus-on the issues and, to some extent, on what ought to be done. These included the following: the problem of the creation of runaway credit; the importance of Basel counter-cyclical capital controls; the separation of retail and investment banking; the need for a rebalancing of the economy, with the banks giving more emphasis to industrial investment; improved accountability and competition; the need for universal banking and the re-mutualisation of some banks, perhaps including Northern Rock; the need for higher ethical standards; the overriding need for greater transparency; the need for equity financing; and the need for greater diversification in banking structure. These are all issues-and I have missed out some-on which I think there is broad agreement across the Chamber.
	Having had an extremely valuable debate, I hope Members will carefully consider the terms of the motion, as it is quite modest. It was designed to get broad cross-party agreement, and I hope it will achieve that.

Question put.
	 The House divided: Ayes 10, Noes 284.

Question accordingly negatived.

Independent Financial Advisers (Regulation)

Mark Garnier: I beg to move,
	That this House has considered the matter of regulation of independent financial advisers.
	I am delighted that my hon. Friend the Member for West Worcestershire (Harriett Baldwin) and I have secured this debate. As all hon. Members will know, this country finds itself in a dire financial situation, which extends deep into the private lives of many of our citizens. This country has the lowest personal savings ratio in the G20 and the highest level of personal debt, with half of all the personal debt in the EU borne by the inhabitants of these islands. We face a well-known problem of pensions underfunding, involving not just a deficit on pension liabilities but the fact that people are not putting enough aside for their retirement. Mortgages were taken out at the height of the boom, in some cases at levels higher than 100% of the value of the property to which they relate, and mortgage lenders worry about the next time bomb that may hit our economy-a trend towards interest-only mortgages. These are mortgages where the borrower hopes that inflation and an opportunity to downscale will pay off their mortgage. We also have a housing market in which many commentators still consider there is more readjustment to come.
	It is against that background that we are debating the regulation of an important group of professionals, namely independent financial advisers. I am particularly keen to talk about that group because if we are even to begin to deal with the problems that I have outlined, we need a resource of professionals who will be able to spread the word and give sound financial advice to the wider population. The marketplace for retail investment advice in the UK is very diverse, involving banks, building societies, stockbrokers and some 33,000 independent financial advisers, as well some other players. It is fair to say that there have been problems in the past, and the Financial Services Authority suggested in its evidence to the Treasury Committee last week that there was and still is a significant amount of mis-selling every year; a figure of some £250 million a year was volunteered, but that is based largely on assumption and extrapolation from previous mis-selling scandals.

Brian H Donohoe: A number of constituents have come to me because they are very concerned about what the hon. Gentleman is talking about, as they are going to have to revalue themselves and go through another examination. Can he shed some light on why that should be?

Mark Garnier: I trust that the hon. Gentleman is referring to the independent financial advisers, who will have to do that. I will come to that a little later in my speech, if I may, but I will address it specifically.
	The point I was making is important because it highlights the significant amount of money being drawn out of the net savings pool of the country. It is only right that the FSA and the regulators should address the problem. They looked into it and surmised that in this marketplace competition is hindered by opaqueness and incentive conflicts, resulting in the interests of firms versus those of customers not being fully aligned. The FSA set up the retail distribution review-RDR-in 2006 to address those problems, and the new rules are due to come into force in January 2013. Specifically, according to the FSA, the RDR aimed to bring about three principal changes. The first was an improvement in the clarity with which firms describe their services to consumers. Secondly, it sought to address the potential for advisers' remuneration to distort consumer outcomes. Finally, it aimed for an improvement in advisers' professional standards.

Tony Cunningham: On that final point, I have also had a number of people writing to me. Would the hon. Gentleman agree that one of the overriding concerns-I have had letters from people with 29 or 30 years' experience-is that experience does not seem to count for anything?

Mark Garnier: That is a recurring theme and I shall come on to that point, but the hon. Gentleman is right to raise it. It has been raised by huge numbers of IFAs who have got in touch with me, my hon. Friend the Member for West Worcestershire (Harriett Baldwin) and with many other Members.
	The three aims that the FSA has talked about are, I believe, laudable in principle, overall. It is not our intention tonight to derail the retail distribution review, which will improve standards for consumers. I suspect that not a single professional in the industry would disagree with the overall principles. Indeed, Which?, the consumer champion, strongly supports the measures contained in the RDR, and states that its members
	"firmly believe that the IFA industry is best placed to offer this advice"
	However, the devil is, as always, in the detail.
	In addressing the problems, the FSA has, through the RDR, introduced issues that disproportionately affect the IFA community. The IFA trade organisation, the Association of Independent Financial Advisers-AIFA-suggested in evidence to the Treasury Select Committee that although some 30% of IFAs strongly supported the RDR and 40% were rather ambivalent towards it, 30% would not put up with the RDR. The 30% who are against the RDR suggest that it would be better to leave the industry altogether, so the community of IFAs would shrink significantly.

Glyn Davies: Does my hon. Friend agree that that is particularly damaging in rural areas, where all the independent advisers are either one-man businesses or very small businesses, and that a huge proportion of the 30% who do not like the RDR are likely to come from such rural areas?

Mark Garnier: My hon. Friend makes an important point. Small businesses in rural areas are likely to be most affected because they have so few resources in their offices. As a direct result, poorer communities in rural areas will be denied access to independent financial advice. That is not a good thing.
	Lord Turner, the chairman of the FSA, suggested that reducing the number of IFAs might well reduce the overall cost of investor advice. How can reducing competition possibly result in improved service to consumers? The key issues facing the worried community of IFAs can be reduced to just a handful of salient points. The first concerns qualifications, which are probably the cause of the biggest mailbags on this subject. It has been said, perhaps a little harshly, that IFAs hold a qualification no better than that of a McDonald's burger bar employee-a qualification and credit framework level 3 pass, which is equivalent to an A-level.
	The RDR requires all financial advisers to attain the QCF level 4 pass and, in the broadest sense, that is not unreasonable. However, it does not take into account the fact that a great many IFAs have a wealth of experience but, with an average age of 47, little enthusiasm to start taking exams. It is estimated that the exams will require 100 hours of study for each of four modules-that is 400 hours of study. We must bear in mind the fact that that is for a full-time professional who needs to earn a living and who may, as my hon. Friend the Member for Montgomeryshire (Glyn Davies) mentioned, be working by himself in a rural community with little support.

John Baron: Can my hon. Friend come up with any explanation of why grandfathering rights could not be applied to those with long experience as IFAs, given that such experience is much needed in the marketplace by savers who are desperate to make good financial decisions?

Mark Garnier: I can see no reason at all for not introducing grandfathering rights. Indeed, when the FSA was set up it introduced grandfathering rights when IFAs came over from the personal finance authority.

Graham Stuart: I congratulate my hon. Friend on opening this important debate this evening. Jon Marris, a constituent of mine and an IFA, came to see me on Friday. He has already passed the exams that will be required-he has done the 400 hours of study-but, even from his position, he believes it is ridiculous that those who have been in the industry for many years should be forced to go through that. Although he has been able to do this, he thinks that the removal from the market of people who are perfectly capable of doing their job but who might not be able to get through the exams, even though they have shown for many years that they can look after customers, is completely wrong.

Mark Garnier: I think my hon. Friend's constituent agrees with us all.
	The IFA community is broadly in support of raising excellence in the profession, and many are opting to take qualification exams on their own initiative without the dead hand of the FSA pressing them to do so. Indeed, the website unbiased.co.uk lists IFAs by their qualifications, so the move towards improved excellence is already going ahead under its own steam. A significant number-possibly as many as a third-feel that their 20, 30 or 40 years of experience not only trumps any exams but covers a significant depth of knowledge in their chosen areas, which will surpass any exam requirements. In taking exams, they will also be tested on areas they choose not to specialise in. As I and many hon. Members have said, the FSA seems blind to their expertise. The FSA does not recognise that experience and is determined to put out of business any IFA who is reluctant to take their exams or to subject themselves to the FSA's ill-thought-through in-house assessment.

Mark Pawsey: Does my hon. Friend agree that if experienced independent financial advisers are driven from the market, those who will lose out most will be those with the smallest amount of assets, who will not get the advice that they receive at present?

Mark Garnier: Absolutely. The other group of people who will lose out because of the removal of these grey-haired sage IFAs will be the younger ones. Who will mentor the young, aspiring and highly qualified but short on experience new trainee? The FSA has no answer.
	Let me turn now to fees and commissions. The FSA is further proposing that from January 2013 consumers will no longer be able to choose how their adviser is remunerated.

Tracey Crouch: Does my hon. Friend know of any survey that has been conducted of whether consumers have any appetite to pay fees for their financial advice?

Mark Garnier: My hon. Friend will not be at all surprised to hear that there are a number of surveys. Which? Undertook a survey that showed that 85% of people would prefer to pay fees, yet a survey by Harris Interactive showed that only 6% of the public said they would be happy to pay fees as opposed to commissions. That is a big problem, I think.
	In future, customers will need to agree a fee with their adviser. That means that no longer will a client pay for advice via a commission charged on a transaction.

Justin Tomlinson: I congratulate my hon. Friend on this excellent debate. Does he agree that if it is believed that commission makes advisers more inclined to promote products with higher commission, the same would surely apply to banks that offer their staff product sales incentives? Should changes not be consistent across the sector?

Mark Garnier: Yes, they should, and it is fair to say that the FSA is looking at the whole sector.
	At the moment, every client is given the option of paying for their advice via a fee or commission. Since 1991, every client of every IFA has been given full details in writing of the adviser's commission, and the overwhelming majority of clients elect to pay by commission. During that period, the market share of the IFA sector has increased from 29% to more than 65%-based on commission charging-with consumers demonstrating a clear understanding of and preference for independent financial advice. It should be noted that independent advice is not the preserve of the wealthy. Some 60% of IFA clients are ranked as C1 or below. If consumers are forced to pay a fee for advice, it is inevitable that many who would benefit from independent advice will not seek it, resulting in only the well-off accessing a significantly reduced IFA sector. The subject of commissions is extensive and I am sure that many hon. Members will want to expand on it in their speeches.

John Woodcock: Does the hon. Gentleman not agree that this issue is not clear cut? Surely it is right that there is some concern about the idea of a commission. Is it not the case that the concern over not wanting to pay fees is about paying a fee up front? Could the fees not be back-ended in the way that commission effectively is, making it a flat rate?

Mark Garnier: The issue of commissions is complex and is surrounded by several other issues, one of the simplest of which is that the Office of Fair Trading has deemed it right that the providers of the products should be able to charge or incentivise IFAs and salespeople in a variety of ways. The difficulty with allowing different levels of remuneration to IFAs is that it creates some of the problems we have talked about, but the OFT will not allow a flat rate of commission, which is one solution that could have dealt with this issue.
	The risk in being an IFA is a major issue. All professions carry an element of professional risk, which is covered by professional indemnity insurance. In pricing that risk, underwriters take into account the fact that there is a so-called long-stop of liability, which is usually about 15 years, but that is not the case for IFAs. It has been deemed fair for IFAs to have an unlimited period of liability, such that an 80-year-old retired sole trading IFA might be liable for a product sold half a century earlier. It might be that the claimant has a legitimate claim, but in our compensation culture it might be that he does not feel satisfied with what he has got and is just having a go.
	In practical terms, for a limited liability company, as the business gets older it becomes less saleable as it accrues a large pool of risk on the products it has sold since it opened its door to trading. Is it fair that an IFA could be chased to the grave in a manner that no other profession allows? Will that indefinite level of risk be an incentive to newcomers coming into the profession? I think that the answer to both those questions is no.
	The cost of implementing the RDR is high. Currently, a firm of IFAs with up to 25 advisers is required to put aside only £10,000 by way of regulatory capital. That minimum will double under the RDR, but there is a new element to come in. Under the new rules, firms may be required to put aside 90 days' worth of operating costs. For the better-run firms with sophisticated systems and offices that could be a significant increase. It is not inconceivable that a firm employing 10 qualified IFAs supported by high-quality support staff could see its regulatory capital rise from £10,000 to £200,000, £300,000, £400,000 or even £500,000. That rule alone is an incentive for firms to go from providing a high-level service to a cut-price one.
	But what does all this mean for the cost of the RDR to the consumer? The original estimates for the cost-benefit analysis of the RDR gave a net present value of £600 million for the first five years including one-off costs. That has now risen to a truly staggering £1.7 billion in order to address an unsubstantiated cost of mis-selling £250 million. Moreover, it is by no means the responsibility of the IFA community alone. In 2009, according to the financial ombudsman, just 2% of complaints in this area related to the activity of IFAs, while 61% related to banks, but 65% of the market share is held by IFAs.

Dan Rogerson: I congratulate the hon. Gentleman and the hon. Member for West Worcestershire (Harriett Baldwin) on securing this debate. Does the hon. Gentleman agree that in putting together the RDR, the FSA has throughout consistently ignored all the comment from the industry, this place and elsewhere and that the time has come for it to listen and to review the whole set-up?

Mark Garnier: The hon. Gentleman is absolutely right. The overriding message coming back from the IFA community is of being ignored by the regulator. It has been suggested that Adair Turner, as someone who comes from McKinsey, looks at the issue from a box-ticking perspective as opposed to considering the fundamental needs of the consumer, which is the important issue.
	IFAs, are going to bear the brunt of the changes, and especially those with small operations in rural communities.

Adrian Sanders: Is not the problem with the whole process the fact that it is angled disproportionately at hurting small traders, often in the poorer areas of the country? That needs to be reversed if the changes are to receive any credibility in or support from this place.

Mark Garnier: That is absolutely right.

Andrew Tyrie: I apologise for breaking up my hon. Friend's excellent speech. Does he agree that a crucial point that we must get across to the FSA tonight is that the increase in these compliance burdens will be paid for by the consumer who will therefore lose out? The loss of perspective from the FSA and the inflexibility of its approach in implementing the changes are reflected in the large number of people here today.

Mark Garnier: Absolutely, and I am very grateful to my hon. Friend the Chairman of the Treasury Committee for bringing that up.
	The £1.7 billion costs being pushed on to the consumer mean that £1.7 billion will be taken out of the savings pool. We simply cannot take that approach if we are trying to encourage people to save and to pay off their debts. That is why the changes are so fundamentally wrong. IFAS will have to bear the brunt of them, especially those with small operations where the requirement to sit exams, recapitalise and install new compliance systems, as well as all the other requirements of RDR, will often be handled by the same individual who is offering advice to the customer. Hector Sants estimated that implementation might mean a loss to the IFA community of 20% of the professionals who work in this arena today. Adair Turner has said that this is an acceptable cost, but I do not agree. It is unacceptable that up to 3,000 professionals according to the FSA's figures, and more according to other research, will lose their livelihoods. Among those who stay, the cost will be passed on to the consumer, as my hon. Friend the Member for Chichester (Mr Tyrie) has said.
	There are many questions to ask. Will the RDR deal with the cowboys? Will a reduction in the number of IFAs encourage a savings culture or detract from it? Is it right that when we are encouraging entrepreneurs to set up new businesses, the outgoing regulator should be bringing about such devastating change to this industry? My constituent Mike Jeacock is typical of the type of IFA who is threatened by the RDR. He runs a high street shop in Stourport-on-Severn and he networks for new business amongst his mates in the Stourport Workmen's Club. These are not high-rolling wealth managers prowling family offices in Mayfair. We are talking about people who earn a living honestly servicing the financial interests of people who can afford little but who need financial advice.
	The retail distribution review is a significant market intervention, and market interventions, particularly of such a fundamental and far-reaching nature, require overwhelming evidence of consumer detriment and the appropriateness of the solution. In addition, any solution needs to meet cost-benefit requirements. Does the RDR satisfy these tests? It appears to be based on a combination of unfounded assertions, limited and contradictory research and, as regards some of its solutions, little more than a hunch that the outcome will somehow be better than the present system.
	It is estimated that up to 10,000 experienced IFAs of good standing will be forced to retire for no valid reason.

Teresa Pearce: The FSA says that only less competent advisers will not be able to comply with the new qualifications and that the changes will therefore act as a sort of natural selection for the industry. Does the hon. Gentleman agree that the opposite might be true because it will be the more successful and long-experienced advisers with well-developed client lists who will not be able to comply or who will choose not to, and that we will therefore lose their experience from the industry?

Mark Garnier: Yes, I agree entirely. It is absolutely the case that the harder-working and more successful IFAs simply will not have time to take the exams and start dealing with the dead hand of regulation from the FSA.
	With up 10,000 experienced IFAs of good standing potentially being forced to retire for no valid reason, it is estimated that as many as 3 million existing clients, many of whom will be elderly, will lose access to their trusted adviser as of 1 January 2013. I fear that without the FSA looking again at grandfathering the experienced through the process of implementation and without a rethink about commissions, independent financial advice will become the preserve of the wealthy only.

Alun Cairns: Will the hon. Gentleman give way?

Mark Garnier: I have just about finished actually.

Several hon. Members: rose -

Dawn Primarolo: I remind hon. Members that there is a six-minute time limit on contributions in the debate from now on so that we can try to ensure that everybody gets in.

George Mudie: I congratulate the hon. Member for Wyre Forest (Mark Garnier) on securing the debate and on putting the case so comprehensively, in such detail and so fairly. This matter is a great problem, but it had gone under my radar as a Member of Parliament until a constituent of mine who is an independent financial advisor came to my surgery and explained what is happening. He falls into the category of being someone in his 50s who for the first time in 30 years is required to study for an examination to keep his job, regardless of how long he has been in the industry with a complaint-free record. I find that amazing.
	As a member of the Treasury Committee, I have tried to aid the hon. Member for Wyre Forest-although he does not need aid-or at least stand alongside him to press for an investigation. I find it worrying that decisions can be taken by a regulator without recourse to the House, and almost without recourse to anyone. Last week, as the hon. Gentleman mentioned, both the FSA and the Governor of the Bank of England came before the Committee, which was an opportunity-although we had a full agenda-to press the matter and question them.
	The background against which the decision has to be judged is interesting. The FSA, rightly, admitted to many mistakes in the operation of its light-touch regulations. It was probably more open than the Bank of England, but that is another story. After Northern Rock, the FSA was very straightforward in meeting after meeting; it came clean and accepted criticism about light-touch regulation. However, Hector Sants decided in a policy speech to project a new image-from where, I do not know. He stated that in future financial firms would fear the FSA, but there is a pendulum effect. If something is released it tends to go too far in the other direction, and I rather fear that the FSA, in attempting to salvage its reputation-if it had one-has moved too far to demonstrate that it is not a soft touch as well as a light touch.
	Members may think that I exaggerate. The FSA is undertaking two reviews; retail distribution is one and the hon. Member for Wyre Forest mentioned the other-the mortgage market review. If Members have not received many letters and e-mails about the RDR, there will certainly be anguished people contacting them when the full power of the MMR comes into effect and young first-time buyers who are self-employed find it difficult to get a mortgage.

Nicholas Soames: It is not just that the FSA has not listened to the industry or its professionals, which will undoubtedly damage the profession. Does the hon. Gentleman agree that the really foolish thing, which is just as serious, is that it will profoundly damage the interests of the consumer? Yet the FSA seeks to protect the consumer.

George Mudie: I completely agree.
	I forgot to congratulate the hon. Member for Wyre Forest on securing the debate and on introducing it. I also congratulate all Members in the Chamber. It appears that the only thing we can do is to come to the Chamber and voice our anger and concern. When the Committee discussed with the Bank of England the new powers of the new regulator, it was the British Bankers Association, of all people, who raised the democratic deficit. The point was made that we were handing so much power to the regulators and the banks that there was great danger that they would be pronouncing and taking action on matters that affect us as representatives of our constituents -matters relating to employment and standards of living. In our humility and generosity, we are passing great power to the regulators on matters for which we will be accountable-perhaps not in law, but in the view of the public. We will be accountable for the actions of the regulators, so a rethink is very necessary.

Alun Cairns: I thank the hon. Gentleman for giving way. I, too, pay tribute to my hon. Friends the Members for Wyre Forest (Mark Garnier) and for West Worcestershire (Harriett Baldwin) on initiating the debate. I congratulate them on that.
	Does the hon. Member for Leeds East (Mr Mudie) accept that the FSA could be acting in the context of, on the one hand, lack of regulation in the banking industry in the past, leading to a complete knee-jerk reaction and, on the other, disproportionate regulation at the consumer end of the market, such as the debate is highlighting?

George Mudie: I do not completely agree. I think the banks could be the beneficiaries if 30,000 independent financial advisers are taken out of the market. The hon. Member for Wyre Forest referred to Lord Turner, whose attitude was that the number would not be 30,000, but between 10,000 and 20,000, which was acceptable, otherwise the FSA would not be doing it. There was no explanation why the number was acceptable, or of the unintended consequences of the decision. The authority had just decided that it would be acceptable.
	Ordinary people who have worked in the industry for decades will be hurt by the decision. It is not a knee-jerk response to oppose the direction of a decision and the manner in which it is being imposed on individuals who have worked in the industry without blemish. It would not happen in other industries and other practices. In addition, there seems to be a lack of interest in the diminution of choice for the ordinary consumer of all ages if the decision is forced through.
	The Treasury Committee has asked for responses. I plead with every Member, whether or not they are in the Chamber, to do some writing and complain. They should ask the very able Chairman of the Committee, who is standing by the Speaker's Chair, to call a review meeting so that we can call individuals on this subject. We do not want to tie it up in a long agenda where it receives only 10 minutes' scrutiny; we want a full meeting where witnesses are placed under real scrutiny and asked both to account for the decision and to reconsider it.

Harriett Baldwin: All I can say is "Wow," when I see how many colleagues and Opposition Members have shown up this evening to take part in this historic debate. I believe this is the first time in this Chamber that the Financial Services Authority, which was set up by the former Prime Minister as the independent statutory regulator, has been subject to such parliamentary scrutiny. In fact, I believe that we are today showing that we can, and do, take a real interest in what the independent statutory regulator is doing.
	The Chairman of the Treasury Committee pointed out how many Members are in the Chamber this evening for a Back-Bench business debate, when we are not obliged to be here by anyone other than the constituents who have contacted us with their concerns.

Alun Cairns: I support what my hon. Friend said about the number of Members present this evening, which is unusual, as she pointed out. The indication so far is that this is a cross-party issue and that party politics is not playing a part in it. The comments from the Opposition Benches support the comments made in the debate.

Harriett Baldwin: I entirely agree. We have learned in the past few years how important good financial regulation is.
	Imagine the outrage there would be in the Chamber if a Minister said from the Dispatch Box, "I am going to put between 20% and 30% of an industry out of business at the stroke of my pen on 1 January 2013"? It is unbelievable that we have allowed an organisation to grow and, unscrutinised by this legislative body, have such a power over our constituents' lives.

Andrew Turner: Does not my constituent, Mike Ward of Ward Financial Services, have a point when he says: "People need to understand that business has changed in recent years. People won't trust banks as much as they did in the past, so they must be careful not to undermine the relationship between themselves and their clients. That would not be the right way forward"?

Harriett Baldwin: I thank my hon. Friend for that intervention. It is the banks that are likely to be advantaged by the change in regulations. I am afraid I have only six minutes in which to raise the many questions that I have about the regulation. I shall focus on a couple of areas that my hon. Friend the Member for Wyre Forest (Mark Garnier) did not touch on much in his remarks, which were extremely comprehensive.
	I want to hear more about the handing of a competitive advantage to the banks. It is my understanding from my discussion with the Financial Services Authority that banks that are trading overseas could come into this country and continue to offer advice. The European Union is about to consult on something called the directive for packaged retail investment products. It would be wise for the FSA to wait and see the results of the consultation before it takes permanent steps here to put out of business 20% of the independent financial advisers.
	I have also heard through the Westminster Hall debate that my hon. Friend the Minister has talked about the free annual financial health check that the Consumer Financial Education Body will be able to offer. I want to hear more tonight from the Minister about how that will be delivered and what the additional cost to the industry through the social responsibility levy will be. Has that additional cost to the industry been factored into the £1.7 billion that is the five-year cost of the retail distribution review?
	For the remaining four minutes at my disposal, I shall focus on my main area of concern, which has been raised by colleagues-the question of the qualifications. Imagine if nurses who were qualified were suddenly told that from now on, nursing was to be a degree-level qualification, and that all existing nurses would have to pass that degree-level qualification or they would not be able to practise their profession. That is what is happening to our independent financial advisers.
	If I thought that passing an exam would prevent mis-selling and we would never have another incidence of mis-selling in future, I would be more supportive of the idea, but I do not see that an ability to pass an exam, which someone in their 20s might be much better at-certainly, I was-than by the time they get into their 50s and 60s, when they have all that experience about financial advice, precludes mis-selling in the future.
	I can offer a few examples. We have been inundated with correspondence on the issue, but a couple of important examples stand out. One adviser wrote to me who is already qualified to chartered financial planner status. He is an associate of the Chartered Insurance Institute, which maps across to a degree-level qualification, but with the FSA's new standards, it appears that there will be gaps. If advisers with such a qualification do not fill those gaps in the two years available, they will no longer have a livelihood in the industry. That is blatantly retrospective regulation.
	Another important example that was brought to my attention was a letter from the chief executive of a friendly society based in Cleveland on Teesside. The case may be raised in the debate; I hope so. The chief executive wrote to me explaining that his door-to-door sales force who sell funeral policies for £1 a week and life policies for up to £5 a week will now be required to take the degree-level qualification. As such, he felt that his friendly society with its 10,000 low income customers would have to shut it doors. May I urge the Minister to try to influence the independent statutory regulator to be more respectful of experience as a qualification?

Russell Brown: Does the hon. Lady agree with this statement: it is one thing to impose new rules on new entrants to the IFA profession; it is quite another thing to disqualify someone who is already qualified?

Harriett Baldwin: Indeed. I understand that there is to be an alternative based assessment. The Minister mentioned it in the Westminster Hall debate, but I want to try to make sure that he works closely with the FSA to publicise that route more extensively, and that he works with the FSA perhaps to soften the cliff-edge of disqualification on 1 January 2013. We all want to see better qualified financial advisers, no question about it, but to close the door on financial advisers practising their profession on 1 January 2013 is not on.
	In conclusion, financial advisers face a triple whammy. We have heard about some of the other issues, but the one that we would all see as being the most illogical is the one about qualifications. As the Government go through the process of changing the way the FSA operates, I urge my hon. Friend the Minister to change the way the FSA regulates the sector.

Michael McCann: The debate might be in danger of becoming a love-in.  [Interruption.] Thank you very much. The hon. Member for Devizes (Claire Perry) was making an open-arms gesture, but I do not know whether I want to go down that route. If détente breaks out, I for one will be delighted. I have been contacted by a number of individuals and groups who have significant concerns about the impact of the retail distribution review.
	The review purports to set new parameters for this important sector of our economy, and regulation is at its heart. The chief executive of the Financial Services Authority characterised the review under three main headings, which the hon. Member for Wyre Forest (Mark Garnier) set out-the need for a transparent and fair charging system, greater clarity on the type of advice offered, and a better qualification framework for advisors. I have no quarrel with the first two points. We may differ a little about the content.
	It is right that IFAs must disclose their charging structures to clients up front and in writing, so that the client has the information in good time, before the advice process starts. It is right that the IFA must also agree and disclose the total charges that the client will incur as soon as those are known. It is right that, from 1 January 2013, IFAs will be able to make an ongoing charge only where they provide an ongoing service. It is also right that from 1 January 2013, product providers will no longer be able to offer commission on their products, and advisers will no longer be able to receive commission set by product providers. That is just hiding the charges within the commission. The major concern on which I think all participants in the debate agree, however, is the concern of constituents who have contacted me regarding the so-called better qualifications for those who work in the market.
	One should not automatically be afraid of higher qualifications for individuals who work in this important sector, but the quality of the debate has not been helped by the tactless, ill informed and unwise comments of the Financial Secretary to the Treasury, who caused great anger among IFAs during a debate in Westminster Hall, when he compared the current level 3 minimum qualification for advisers to that of a McDonald's shift worker.

Claire Perry: Does the hon. Gentleman agree that, by focusing so narrowly on qualifications, we miss one of the most important things in any investment industry-experience and a track record? By narrowly defining what we think of as the appropriate qualifications, we completely ignore the experience that many IFAs bring to their positions. They will be forced out by such regulation.

Michael McCann: I agree entirely, and I shall address that point a little later. It is why my constituents and I were so angered by the comparison of the current level 3 minimum qualification to that of a McDonald's shift worker. It is, indeed, an insult to the many of thousands of people who work for that company-a company whose products, looking around the Chamber this evening, I am sure a few people have sampled.

Andrew Murrison: The hon. Gentleman is concerned about the QCF-qualifications and credit framework-level 4 qualification, but is he not concerned also about the impact of the measure on the need for continuing professional development outlined in the RDR, and the fact that it is likely to disadvantage small operators who will not be able to rely on the critical mass of a large organisation when taking time off-probably about a week every year-to conduct CPD?

Michael McCann: I agree entirely. The measure will impact on small businesses, not the big part of the sector, and that is why the Financial Secretary should have been mindful of the commitments people have to make to gain qualifications in the sector. One IFA, in particular, heard the Minister's comments and blogged:
	"I've just spent 70 hours revision to pass RO1. Nobody has paid me for my lost time. Nobody has asked me 1 of the 100 questions in the exam for the last 22 years. This guy"-
	the Financial Secretary-
	"needs to get in the real world."
	That leads me to my main contention: the proposals and timetable to increase the qualifications needed to participate in this sector of the economy are not sensible. Exams and qualifications in the sector are not new, but the proposal to introduce new rules that effectively force people to re-sit exams without taking account of their experience or, most importantly, clean regulatory record is patently unfair. Moreover, the sector will not be able to absorb the cost of revalidation; instead, as other contributors have said, it will be passed on to the customer in the shape of higher fees.
	Others have also mentioned that many professional groups in the United Kingdom are not asked to revalidate, so I seriously wonder why we are trying to isolate this particular sector. Why, as other hon. Members have asked, do we want to take away that valuable experience from that important part of the economy?
	Our time is limited, and there is a limit of six minutes on each contribution, but I too want to mention one individual who has contacted me in the lead-up to the debate. He is an old friend of mine, a next-door neighbour, and it is important that we bring our experiences to the House when we discuss such issues. Jim Hunter sells financial products, and he contacted me, but he did not complain about the need for transparency, fairness or greater clarity. In fact, having done business with Jim, I know that he had all those ingredients many years ago. Indeed, I am sure that many people who have contacted hon. Members are in exactly the same boat.
	Jim was talking to a colleague recently at a meeting. The gentleman is 60 years old, with more than 30 years' experience in the industry, and if he sat the proposed exams he would be 63 before he finished them. Jim explained that that person would be lost to the industry and have to retire before his time, because he would not study at that time of his life. There are many people like that, trying to make a living for themselves in difficult times, and that ability to earn a living in this important part of our economy will effectively be taken away from them without any real benefit to the economy itself.

Tracey Crouch: Does the hon. Gentleman agree that, although the RDR was introduced with every good intention, further work should be suspended until there has been a full cost-benefit analysis of its impact on the IFA community and, indeed, on consumers?

Michael McCann: I do not think that that point is unreasonable at all, and it could be taken on board.
	One point has not been mentioned in the debate, but it is an important one to make in the last minute of my speech. The final thing that my constituent said to me is that many IFAs work on trust. That trust takes a long time to build up with individuals. If you take that experience out of the sector, the trust will go. People will be uncomfortable about going to new IFAs because they will have to rebuild the trust all over again. We should be mindful of that.
	The RDR is an important piece of work and it is important that we get it right. For that reason, I urge the Minister and members of the Select Committee to take the comments away, recognise the need for common sense to prevail and work with the industry to come to a common-sense solution.

Heather Wheeler: I declare my interest: I am an associate of the Chartered Insurance Institute, having studied for and passed my professional exams in 1985. Although I have not practised as an insurance broker since 1987, I wanted to speak tonight because I recall the debate when I was studying about how the importance of exams was a strong factor in professionalising the insurance sector. At the time, I felt that that was an over-egging of the situation, and here we are 25 years later and the Financial Services Authority is using a sledgehammer to crack a nut.
	I am totally opposed to the new rules that the FSA is imposing on independent financial advisers. If I felt that it was imposing them because there had been bucket loads of horrendous examples of mis-selling, or because clients had been ripped off, or because there were statistics to show that the IFAs had been responsible for the majority of the complaints in the industry, perhaps I could understand. But none of that is true. As we have heard, the IFAs are responsible for only 2% of complaints from customers; the banks bear the brunt, at 61%.

Robin Walker: I thank my hon. Friend and congratulate my fellow Worcestershire Members on having this debate. Does my hon. Friend realise that the figures of 2% and 61% that she has just cited are further strengthened by the fact that the proportion of complaints against IFAs has gone down every year for the past five years and the proportion of complaints against the banks has risen every year over the same period?

Heather Wheeler: My hon. Friend is correct. Is that not interesting? Many of us have been trying to get to the background of why this retail distribution review was brought in and where the FSA was coming from. The statistics really speak for themselves, and I am astonished that we find ourselves in this position.

Alun Cairns: Even if the statistics were much worse than they are, does my hon. Friend believe that the proposals in the RDR would lead to improved and safer advice for clients? I certainly do not believe that they would, even if the statistics were worse.

Heather Wheeler: Absolutely. I thank my hon. Friend for bringing up that point. It is clear that the baby is being thrown out with the bathwater. Nobody at the FSA seems to want to explain why. IFAs that have offered solid advice for years, with unblemished records, should be granted grandfather rights. Like many other Members, I have been trying to find other areas of business where new rules are to be introduced without any grandfather rights. I cannot. Even licensed properties-pubs, to you and me-kept their grandfather rights when the new licensing laws came in a little while ago.
	It has been estimated that the effect of the rules being introduced in 2013 will be that we will lose 30% of practising IFAs. Where will the business go? Yes, you guessed it: to the banks-to the people who have the record of providing 61% of the complaints from customers. What is the FSA saying about that? Absolutely nothing. We have to ask ourselves why the FSA is doing this. I cannot find a credible reason. As we have heard, on its own cost-benefit analysis, the cost of introducing these new rules has risen from £660 million to £1.4 billion to £1.7 billion.
	I urge the Minister to reopen talks with the FSA, not to allow it to put 30% of IFAs out on the scrap heap and not to reduce individuals' choice of where to go for financial advice. Finally, he should use all his charms-he knows that I know he has charm-on the FSA, because the Government are new and "choice" and "fairness" are the catchwords that represent us, not "draconian, bureaucratic, Stalinist centrists".

Tom Blenkinsop: I congratulate the hon. Member for Wyre Forest (Mark Garnier) on securing this important debate. I am pleased that the hon. Member for West Worcestershire (Harriett Baldwin) referred to the Kensington Friendly Collecting Society, which is a very good organisation in my area.
	As a Co-operative Member, I represent the interests of some people on low incomes who have been denied access to financial advice and products provided by friendly societies and mutuals as a result of the qualification requirements contained in the retail distribution review. The Kensington is a friendly society that has existed in Middlesbrough for 106 years. Mark Brooks, who is the chairman of its committee of management and a constituent of mine, and James Lancaster and Phil Carey wrote to me from the Kensington to raise their situation. The Kensington has 10,000 members throughout the Teesside postcode area. It provides savings and insurance products to those members for as little as £1 per week and a maximum of £5.70 per week. It provides opportunities for its members to obtain basic financial products. Without this provision, members of the society would largely be excluded from financial services and have to go to more expensive services, namely the banks, or to loan sharks.
	The RDR is currently being finalised by the FSA. Its most likely outcome will be that the society will close down, which will mean that 10,000 members will lose their ability to save small sums of money for their funeral or for a rainy day. The reason is that the FSA is proposing a blanket qualification for any person offering financial advice-a qualification that is considerably higher than the current requirement. The FSA will not permit exemptions to this qualification structure, and it will not permit a gradual increase in qualifications vis-à-vis the risk and complexity of the product being advised on. The advisers at the Kensington and other societies will be required to obtain degree-level qualifications to sell a simple endowment or whole of life policy for a maximum premium of £5.70 per week. This is the only type of product that they sell, and the level of qualification required is disproportionate to the advice that they give.
	The syllabuses of the proposed qualifications are irrelevant to the needs of those on low incomes. The exams focus on trusts, inheritance tax, capital gains tax and portfolio management. Those on low incomes may aspire to require this level of financial planning, but in the here and now they need advice on issues such as debt and benefits. The qualification requirements will mean that members of this society and others will be denied access to financial advice after 2012. The society will be unable to recruit new members because its advisers will be unable to offer advice to prospective members. A lack of new members will mean that this society and others will close. As a result, their members will lose access to financial products that they can afford and, in all likelihood, will be excluded from financial services thereafter.
	That outcome seems to contradict the aims of the FSA and the Government in tackling the issue of financial exclusion. The RDR, while seeking to protect the interests of high net worth consumers, is by default taking away one of the few opportunities that those on low and insecure incomes have to obtain financial products. If the Government and the FSA are keen on promoting financial inclusion and financial literacy, then the existence of friendly societies like the Kensington is essential in delivering such benefits to those on low incomes. The concept of mutuality appears central to the idea of the big society, yet the consequences of the RDR would be to remove the remaining friendly societies that promote this notion.

Jim Shannon: Does the hon. Gentleman agree that the reduction in IFA numbers would also have an impact on the volume of new insurance policies and the work that would come from that?

Tom Blenkinsop: Yes, I certainly agree. We would lose skills and experience, as well as putting people out of jobs for no good reason whatsoever.
	The qualification requirements would deliver no discernable benefit to the vast majority of consumers beyond the wealthiest few. Let me assure hon. Members that by arguing against the proposed qualifications, I am not saying that such members deserve less than the better-off, but merely stating that they require different things.
	The Kensington has increased its premium income by over 40% in the past seven years despite the fact that tax-exempt premium limits have not been increased during this period. That indicates that there is a demand for the service and the products. The Kensington delivers products that fulfil real needs for those on low incomes. For example, in the Teesside area, owing to bad debt difficulties, undertakers will not proceed with a funeral unless the deceased's relatives can provide a deposit of £750. The Kensington, among others, can fulfil that need because its minimum premium is £1 per week, which is enough to generate £1,000 of death cover. It has a local presence, which means that the agent can deliver a death claim cheque to the family directly within two working days of the member dying, and the whole process is conducted by someone whom the family knows.
	The majority of members of the Kensington and other friendly societies in Teesside live in the poorest and most socially deprived council wards in the UK. Our people require honest and appropriately qualified agents who understand the benefits system, can provide advice on debt issues, and can generally assist in all forms of financial planning for those with limited disposable incomes. It is difficult to imagine that any such member would ever require advice on IHT planning, trusts, corporate financial planning, portfolio management or CGT.
	The QCF level 4 is a disproportionate qualification for the home service market operating within tax exempt limits. It will not add value to consumers, nor improve the service that they receive. It will make home service sales forces even more expensive to run and will generate further financial exclusion. A more considered qualification that focused on the real, everyday financial issues that affect those on low incomes would be welcome. Current academic thinking reinforces my view, which I assume is shared by other hon. Members, that the only effective method of accessing and engaging those on low incomes in savings and protection products is a direct sales force. Indeed, the Department for Work and Pensions website states that tenant engagement teams are being piloted to increase take-up of home contents insurance,
	"particularly as all other traditional methods of promotion (leaflets, flyers, competitions, prizes etc) have not resulted in large scale increases in the number of policy holders."
	In conclusion, the RDR qualification requirements for advisers selling tax-exempt, small premium assurance products are disproportionate and irrelevant to the needs of those on low incomes. The RDR will reduce the access of those on low incomes to basic assurance products at a time when significant amounts of energy and money are being invested in promoting financial inclusion in that area.

Guto Bebb: I congratulate my hon. Friends the Members for West Worcestershire (Harriett Baldwin) and for Wyre Forest (Mark Garnier) on instigating this debate. I was unable to attend the Westminster Hall debate on 20 October, but the transcript indicates the quality of debate that we have in this House on occasion.
	Many issues have been discussed at length, so I will attempt not to repeat what has been stated by other hon. Members. However, I will highlight some areas of concern. I concur with hon. Members who believe that the FSA is taking a sledgehammer to deal with problems that are not great enough to warrant it. The FSA's proposals will damage choice and result in small businesses being forced out of trading. It will affect the choice available to people who live in rural communities in particular. As has been stated, the proposals discriminate against older members of the financial advice community. There will be an effect on the availability of advice and support for those who are less wealthy in our society. All those problems must be addressed.
	On damage to choice, Ernst and Young estimates that as a direct result of the proposals, there might be a reduction of about 50% in the number of financial advisers who are willing to carry on trading and that there might be as few as 10,000 fully accredited financial advisers with about another 10,000 providing restricted services. Such a reduction is unacceptable. Even the FSA states that there might be a loss of as much as 25% in smaller firms who are willing to provide this service. It is difficult not to conclude from those figures that the proposals will affect choice. I find it hard to accept the FSA's argument that it is bringing forward the proposals to serve consumers and give them more protection and choice.

Andrew Bingham: Does my hon. Friend agree that as well as removing choice, the proposals might lead to people not bothering to save-at a time when people need to save-because they cannot get advice on how to do so or on where to put their money?

Guto Bebb: I accept that point. In particular, I believe that those who are less wealthy in our society will be discriminated against, even though there should be greater encouragement for them to save than other people. That issue relates directly to the damage to choice.
	Although I share the Treasury's view that there is a need to ensure that advice is of a high quality and accept that there has been mis-selling and bad advice-I do not argue against the need for a degree of regulation-it is difficult to accept proposals that even the FSA accepts will result in a reduction in the services that are available to the public. In particular, I remain unconvinced of the merits of the examination process being the be-all and end-all. Are structured learning and examinations really a substitute for experience, integrity and honesty? If I were looking for a financial adviser, those qualities, rather than an exam, would be the first on my list.

Claire Perry: Does my hon. Friend agree that one way of taking the matter forward is to allow consumers to decide? We all believe in consumer choice. If the proposed laws were passed and financial advisers had to have letters after their names, we could have a grandfathering clause so that the consumer had a choice. They could go with experience or with somebody who had sat the exams under the new regulations.

Guto Bebb: There is a lot of merit in that argument, and I would be encouraged if the FSA were to consider such an approach.
	As a Member who represents a rural community, I am well aware that the change will have a much greater impact on smaller financial advisers. After all, the cost of regulation is estimated at about £6,000 per adviser. That could be taken as being reasonable in the context of a large, city-based financial advice firm, but for small firms in my constituency such a regulatory burden could be the difference between remaining in business and leaving business.
	At a time when the coalition Government are stating clearly that they want the private sector to create jobs, and that they want to get rid of the red tape and bureaucracy that have stifled a generation of jobs in small businesses, I find it odd that the financial advice sector is being earmarked for different treatment. The financial advisers to whom I have been talking support the coalition fully in trying to reduce the red tape and bureaucracy that small businesses face, but they would like to be included in the discussion.
	On rural services, we in Aberconwy have suffered in many ways, such as the closure of small post offices. We have also seen the legal aid franchise service stopped for the time being, creating a real threat of no legal aid services being available in any of the small towns in my constituency. I therefore believe that we should be very concerned about the further attack on small businesses in rural communities that we are discussing this evening.
	In many small market towns, financial advice is part and parcel of what people have come to expect. When they go into town on market day, they can do their banking and go to the post office, the local shop and the solicitor, but they can also go to the financial adviser. It is not acceptable that people who live in a rural community will have to drive to the nearest large town, or even perhaps use the banks instead. Banks in rural communities, and certainly in my constituency, are now nothing more than counter services. It is a real problem that services in rural areas are under threat.
	My hon. Friend the Member for Ipswich (Ben Gummer) made the point about rural services very strongly in the Westminster Hall debate, and I agree with him, but I would go further. In Aberconwy, many professional firms work through the medium of Welsh. If rural financial advice services are taken away from parts of my constituency, people will lose the ability to go to a local financial adviser and deal with their problems in the language of their choice. People in my community switch between Welsh and English in the same way that people go into a café and choose coffee or tea-it is quite natural for people to use their own language when dealing with their own affairs. I wonder whether larger concerns in more anglicised towns on the coast, or further away in Cheshire, will take into account the need to provide a Welsh-speaking service.
	On discrimination against older financial advisers, I question why no grandfather rule is proposed. Why are we not willing to consider experience as being of importance? I shudder at the thought of leaving people in my constituency dependent on the banks rather than having an IFA. If having an independent adviser is good enough for some people in our society, it should be good enough for people in my constituency. The proposals should be reconsidered, and I endorse the call for the FSA to think again about the damage that it is doing to a very important service in my communities.

Jim Shannon: I congratulate the hon. Members for West Worcestershire (Harriett Baldwin) and for Wyre Forest (Mark Garnier) on introducing this apt motion. It has certainly galvanised a lot of interest in my constituency. Like all hon. Members, I have received e-mails, letters and phone calls, and I have held personal interviews, so I have had lots of information. My constituents have made it clear to me from the outset that this is not just about advisers who provide help to wealthy people who can stay at home and watch their money work and grow. I am speaking tonight on behalf of people who have a small sum of disposable income and who wish to enhance their small pensions at retirement age and seek help and advice from financial advisers. They have asked me to speak on their behalf, and I happen to know that some of them are watching the Parliament channel to see that I say what I said I would say.
	One constituent sent me some background information, which sets out the situation very clearly. The retail distribution review appears to offer solutions-at least on paper-to matters which the FSA has identified as problematic within the industry. I am not aware of those problems, which concerns me. The FSA believes that the measures set out in the RDR proposals will provide for greater consumer confidence and engagement within the industry. It is planned that all advisers attain the qualifications and credit framework level 4 qualification by 31 December 2012.
	A constituent of mine wrote:
	"I have attended seminars at which RDR and the future of Independent Financial Advisers are discussed. They all have the same line...segment your client base...they give guidelines how to do this so that we have an income stream from a fee base structure. If I were to follow this suggestion I would have 3 clients left. When I question this approach, on every occasion the reply is...I need to change my market."
	Did anyone ever hear such advice in all their life? Goodness me!

Tom Blenkinsop: Building society closures and the exodus of the large phone service companies have reduced almost to nil the supply of premium products for those on low incomes, particular the 4 million who still feel disengaged. What do the hon. Gentleman's constituents think about that?

Jim Shannon: I thank the hon. Gentleman for his comments. I have the same concerns.
	It is estimated that it takes 400 hours to do the exams. That is approximately 10 weeks when people do not have the opportunity to earn money or do what they normally do. Advisers in Strangford have painted a different picture to that painted by the retail distribution review. Most of the customers of advisers in my constituency are working class. I have been informed by many financial advisers that they have spent time with people without receiving any financial reward-we have heard that from hon. Members on both sides of the House tonight.
	One adviser offered advice to a female client who was about to go through a separation. She was stressed out about her finances, but the adviser spent a lot of his time on the phone to her. For all his work, he earned not a penny. The road that the regulator is pushing advisers down will mean that they will be unable to afford time if they do not get paid. Will we therefore end up with people being unable to afford sound financial advice, exactly as the hon. Gentleman said?
	I represent a rural area, as do many hon. Members, including the hon. Member for Aberconwy (Guto Bebb). We are aware how the proposals will affect and impact on people in rural areas. Consumers will suffer substantial and unprecedented detriment owing to the unintended consequences of the proposals. Would it not be wiser or better to protect grandparent rights, as at least two or three hon. Members have intimated? Doing so would give the protection that many need. A substantial portion of the adviser population will leave the industry. Various surveys have been conducted and although there is no consensus on the figures, it is obvious that adviser numbers will fall drastically.
	One of my constituents in Strangford wrote:
	"I am 54 years of age...the heavy regulation is taking its toll. I am 3/4 of the way through the new exam structure. Many advisers are finding it impossible to pass these exams as many are over 55 and are finding the stress unbearable."
	Another hon. Member referred to a 63-year-old adviser for whom contemplating exams will put him away in the head. The result will be anxiety, depression and stress. My constituent predicted a drastic fall over the next three years in the number of independent financial advisers. He continued:
	"Advisers are finding the regulations unbearable, and many are having problems due to"
	what is taking place. He made a statement that I found moving and honest:
	"We are all starting to swallow the negativity thrown at us by the regulator over the past numbers of years, which is trying to kill us off".
	Now IFAs are facing another obstacle and barrier. We cannot afford for any businesses to be lost, especially ones that will take the financial burden off the state by enabling people to supplement their pensions and not need state aid and benefit. They are the people in my constituency and across Northern Ireland on whose behalf I wish to speak.
	Robin Stoakley, head of intermediary business at Schroders, said:
	"I do see up to 30 per cent of the IFA market leaving".
	How on earth could we support something that would take away 30% of the IFA market? Furthermore, Aviva UK Life marketing director, David Barral, said the firm predicts that by 2013, IFA numbers will fall to 10,000, leaving middle market consumers unserviced.

Andrea Leadsom: Does the hon. Gentleman agree that at a time when we desperately need small and medium-sized enterprises to be increasing their activity, not reducing it dramatically, this is a disastrous thing to be happening?

Jim Shannon: I agree wholeheartedly with the hon. Lady. The one great thing about tonight's debate is that we have, I think, a united front-if that is the way to put it. All the parties are in agreement, which is good news.
	Time does not permit me to go through the long list of people in the industry agreeing with the prediction of a sharp decline in the number of advisers owing to these proposals. However, it is clear that there is a definite problem with these regulations and their impact on IFAs. If the adviser population falls by about a third, as predicted, it will leave millions of consumers without an adviser. Some will migrate to other advisers-we understand that-but a great many will be left without a trusted source of advice. The UK currently suffers from the largest saving retirement and protection gaps in its history, and it is essential that these gaps and the current over-reliance on the state are reduced. I think that many in the House are prepared to accept that.
	The UK can ill afford to lose 10,000 advisers. Such a catastrophe would intensify the existing problems. The UK's leading consumer champion, Martin Lewis, of Money Saving Expert, remarked:
	"There's a worrying possibility that the FSA is about to kill off"-
	his words-
	"independent financial advice in the UK for all but the wealthy. I do hope I'm wrong. I'm not convinced most people will want to pay for advice. The commission route has the advantage that you don't pay a fee each and every time you want information; you can go without the worry of laying out cash."
	That is an expert's opinion.
	I speak not only for the financial advisers in my area who have been forced out of their jobs, but for the wee man and the wee woman who have asked me to come here and fight their case for them. I also stand for the thousands of people in my constituency who benefit from the current system. People who are forced to pay for all advice offered will be unable to invest much, and therefore will not invest or, worse, will invest somewhere they should not, with dire consequences. I am aware that it is the FSA that is making these recommendations, and I ask the Minister to do the honourable thing and support the alternative proposals put forward. They would benefit the larger advisers, as the FSA is trying to do. However, we also have to look after those disadvantaged consumers, so I urge the House to support them.

Several hon. Members: rose -

Dawn Primarolo: Order. May I remind hon. Members that I want to begin the winding-up speeches at about 20 minutes to 10? There are 16 Members who still wish to speak in this important debate, although there might be more-I have not seen them all. Hon. Members do not have to use the six minutes, but I am not going to reduce the time limit, because I appreciate that it is difficult to make the strong arguments hon. Members want to make in less time than that.

Tessa Munt: I have taken feedback from my local independent financial advisers in rural Somerset. The general approach to the retail distribution review has fundamental flaws and will inevitably fail in one area-which is surely to encourage people to buy more financial products and to take responsibility for their financial futures. The RDR will fail because the regulator is trying to impose on the industry an advice process and a particular bids model without recognising or understanding the realities of what the public want.
	Surely it would be better to find a way of developing an environment in which product providers and advisers have the freedom to develop their own business models, providing that they were honest and straightforward with clients and treated them fairly. That would allow innovation and would have some chance of success. The whole situation is similar to what happens when central Government try rigidly to control everything, instead of delegating responsibility to local authorities. Central Government do not always understand the issues at the grass roots and may get it all wrong. This Government should move us away from a prescriptive approach to one that allows an element of freedom.

Neil Carmichael: Will my hon. Friend give way?

Tessa Munt: I want to be brief.
	We should consider what an IFA's clients are seeking to buy when they look at financial products, look at what they do not like about the present procedures and consider whether the RDR will change anything. A constituent of mine has stated that when his clients buy their financial service products, they are seeking a similar experience to that when they buy other goods. First, they want the buying process to be a simple and pleasant experience. If the Government wish the public to buy more financial products and take responsibility for their future, they should not forget that fundamental point. That is not easy to achieve in the current environment. For a start, most clients do not like to be issued with mountains of complex paperwork. They find it quite intimidating.
	Secondly, a lot of people visit an IFA with a specific purpose in mind-to invest some spare funds, to discuss their pension, and so on. They wish to restrict the conversation to those points that they believe are relevant and, having listened to what the IFA has to say about the matter, will wish to make up their own minds about whether the product under discussion is suitable for their needs. However, once in discussions, people often have to go through the IFA's "advice process", and are no longer responsible for their own decisions. The IFA has to be sure that the product is right for them, so these people find themselves undergoing a time-consuming and irritating process, having to answer personal questions that they often consider an invasion of their privacy.
	Thirdly, clients quite rightly seek value for money. Unfortunately, the whole regulatory procedure is so cumbersome that it is no longer cost-effective for those with limited funds to seek an IFA's advice. The cost of many financial products has risen dramatically. For example, 30 years ago the annual management charge on a unit trust was usually 0.25% or sometimes 0.375% per annum, but now it is usually 1.5% per annum. Much of the increase has arisen purely as a result of regulatory costs. A significant part of the cost increase is driven by regulation, so everyone suffers.
	Will the RDR change any of the above? Not in my opinion: there is little evidence that any of those fundamental issues will change as a result of the RDR. We are all in favour of raising standards, but further examination passes will not address any of those issues.

Annette Brooke: Does my hon. Friend agree that it is quite surprising that even where IFAs are well on their way to getting the new qualifications, they are still against the system and see the exams as pointless? The new qualifications will not weed anybody out, which might have been their objective, because everybody sees them as inappropriate for the job that these people do.

Tessa Munt: Absolutely, and I thank my hon. Friend for her intervention.
	The cost of paying for the IFA's time will not change. We are all in favour of raising standards, but further examination passes will not address any of the issues that I have set out, and clients will not mind whether they pay commission or fees. To improve matters, the regulator must lessen the threat of litigation by giving clients the freedom, if they so wish, to take an element of personal responsibility in their decisions and to buy from an IFA after those discussions. The regulator must also stop telling IFAs how to structure their business models and must allow them be innovative. Without the mountains of regulation, most experienced IFAs could significantly improve the service that they offer their clients while dramatically reducing their charges. Also, they could probably employ more people and could significantly improve the customer's experience.
	I would like to quote from two small independent financial advisers in rural Somerset. One says:
	"If the RDR goes through in the current format I am likely to lose the adviser...I employ. He is highly intelligent (a university graduate) and has over 20 years relevant experience. He is very competent to undertake the work that he does. However, he is in his...fifties and is busy with two children still at home and another at university. At this stage of his life he simply does not wish to use all of his spare time studying for further examinations. So this will be another person in your constituency without a job-so unnecessary."
	The second person said:
	"I am lucky, I have all the necessary exams. I just hope they do not raise the bar again. I really could not face the pressure of having to pass more exams at my age. If it happened, I would have to close and more people would lose their jobs."
	The FSA in this case is judge, jury and executioner. I ask the Ministers to reconsider the rules for 2013, and to reopen talks with the FSA, to make it possible for independent financial advisers to offer the high-quality service that they want to give to their customers.

Nia Griffith: I recently met a group of independent financial advisers who serve Llanelli and the surrounding area. They fully understand the need to have a properly regulated industry, and the need to improve consumer confidence. They want high standards, and I can assure hon. Members that they simply would not get away with it if they did not have high standards, particularly in a close-knit community, where everyone knows whether they have done well or badly in their last transaction. Their next custom really does depend on that. They also made the point that they already have certification. In addition, many of them have a great many years' experience. They also accept that new entrants to the profession need proper qualifications and training.
	A number of difficulties have already arisen with the new scheme. The first relates to the availability of slots to take the exams at the examination centres. One independent financial adviser in my constituency is waiting for a slot to take an exam in January in Bristol. Now, Madam Deputy Speaker, there is nothing wrong with Bristol, except for the fact that it is some considerable distance from my constituency. There is also the inconvenience of having to travel there in the winter, to fill a particular slot for a particular examination. If that slot were not available, they would have to go somewhere else.

Andrew Bingham: Does the hon. Lady agree that, if grandfather rights were to be introduced, as many of us wish, it would not only be fair to existing IFAs but release more slots so that new ones could come into the market, thereby increasing competition and choice for consumers?

Nia Griffith: Indeed, there are certainly issues about the way in which the whole system has been set up and run, and about whether it can be worked properly. As the hon. Gentleman points out, to have so many people trying to take the exams in just two years is not particularly practical. The time scales are extremely tight, and the independent financial advisers have to book into the slots. Another problem, of course, is that they do not always pass the exams.
	That brings me to the nature of the exams. As I have said, independent financial advisers already have certification, and I have seen some of the questions that they have to answer in order to gain that certification. Many of them seemed to require a very different kind of knowledge from the knowledge that the IFAs in my area usually need. Furthermore, IFAs are fully aware of their own shortcomings. They know that they have limitations, and that they will sometimes need to pass a client on to someone else for specialist advice.
	One very experienced financial adviser in my area is a well respected member of the community who is very much involved in local town centre activities and in keeping the community alive. He recently failed one of these exams, however, which has knocked back his morale and that of a number of other financial advisers who know him. He failed the exam not because he was not perfectly capable of doing his job or because he lacked intelligence or experience. That seems only to confirm that the nature of the exams needs to be reconsidered. We also need to take into account the enormous amount of time that has to be put into them -400 hours has been mentioned, and that is probably the minimum-as well as the costs involved.
	I know from experience of developing new examination schemes what happens in such circumstances. Everyone wants to put in their 5p worth and everyone wants extra questions on their area, and the whole thing develops until it becomes so big and unmanageable that no one could possibly want it as a syllabus. Another problem is that people are often terribly worried about being thought of as soft. They are worried that someone is going to tell them that standards are falling, so they decide to put in harder and harder questions to try to counteract that.

Harriett Baldwin: Have any of the hon. Lady's constituents been able to observe how the qualifications might help to identify those independent financial advisers who might have a tendency to mis-sell, compared with those who might not?

Nia Griffith: My constituents have made clear to me that many of the questions do not bear much relation to what they do in their everyday work, and are certainly not a test of their integrity. That does not mean that they do not want regulation or do not like the idea of having proper qualifications and a respected profession, and it does not mean that we should abandon the RDR altogether. What those people are saying is that we should look at the detail again and create a workable system that can be respected and is a useful tool, rather than one rejected by the profession that will not help anyone in the long run because it will simply lead to an exodus that will have the impact on local communities that many Members have described.

Robert Buckland: I probably know some of the constituents to whom the hon. Lady has referred. Some of them have been in touch with me, as well as with my local independent financial advisers. In other professions, when it comes to continuing professional development and examinations, those who specialise concentrate on their specialities, and therefore undergo tests that relate to their experience. The problem with the RDR regime is that it is far too general. That puts people in a really difficult position, which is unfair.

Nia Griffith: My friend and compatriot is right. That is why those responsible refer such people to others. They know that they do not know everything; they know what they do know, and they know what they do not know. This is not about throwing the baby out with the bathwater. It is not about abandoning the system altogether. It is about getting it right: it is about having another look, and establishing whether there are ways of implementing the system that will make sense. We need an arrangement that will not create a time scale that is difficult to adhere to, will not depend on slots that are impossible to secure, and will not involve questions the answers to which people will not need to know in their professional lives. We need modifications to make the system much more manageable.

Geoffrey Clifton-Brown: I will speak very briefly. I will chuck away my notes, and see if I can do better than six minutes. I am delighted to be able to speak in the debate. I was urged to do so by two constituents in particular-Roger Clark, who is listening to the debate not far away, and Mr William Dixon-but others have written to me as well.
	The number of IFAs has fallen from 32,000 to 29,000 in the last two years. When Hector Sants, the excellent and much revered and admired chairman of the FSA, appeared before the Treasury Committee last week, he estimated that between 10% and 20% of IFAs would go out of business as a result of the RDR provisions. I ask Mr Sants this: who are we-who is he-to put 5,800 companies out of business with a stroke of the pen, and what is the problem that needs fixing?
	Many Members have quoted the figures this evening. IFA complaints to the financial ombudsman's office: 2%, of which 39% are upheld. Complaints about the banks: 61%, of which 50% are upheld. No doubt my hon. Friend the Minister will say that that is because the banks offer a wider range of services. Of course they do, but I do not think that that explains such a large disparity.
	I want to make three points. The first relates to the qualifications and credit framework level 4 qualifications. I am a qualified chartered surveyor, but I cannot think of a single professional body whose members would have to obtain a retraining qualification halfway through their careers. My hon. Friend and neighbour the Member for West Worcestershire (Harriett Baldwin) mentioned nurses, and other hon. Friends have mentioned publicans. None of those have to retrain.
	Let me say one or two things about these exams. I agree with others that there should be grandfather rights, and I think that the implementation should be put off for five years. As we all know from the home information pack debacle, it takes time to implement exam regimes of this kind. I think that 31 December 2012 is too soon. I also think that it would be perfectly reasonable to ask new entrants to the IFA profession to undergo the exams, but to give grandfather rights to existing practitioners, many of whom have had many years' experience.
	I understand that two kinds of qualification will be granted under the new regime: a restricted qualification and an independent qualification. Someone will go to an IFA who will say, "I can advise on mortgages but I cannot advise on pensions, because I have only a restricted qualification." I think that that is thoroughly unsatisfactory.
	The second issue I want to talk about briefly is commission-based product withdrawal and the accusations that it can lead to practitioner bias or product bias. The Financial Services Authority asked Charles River Associates to undertake a survey into the matter, and he concluded that
	"there was no evidence that moving to"
	a fee-based model
	"to the exclusion of a commission would lead to benefits since consumers choosing to pay on a fee basis do not receive better advice than those opting for a commission basis."
	I also agree with those who said it will favour the wealthy in society and put the poor at a disadvantage, because the poor cannot afford to pay this fee up front, while the idea of phasing it in over a number of weeks or months would be unfair to the IFAs. That proposal is therefore not very sensible either.
	The third issue I want to raise is the cost of compliance. Two years ago the cost was estimated to be £680 million; last year it was estimated to be £1.4 billion; today it is estimated to be a staggering £1.7 billion. That is £6,000 for every practitioner. For a sole trader or a small business, that is a huge amount of money, while for large IFAs with a number of partners it does not matter quite so much. I therefore urge my hon. Friend the Financial Secretary to consider very carefully what has been said today. I cannot remember a debate during my entire 18 years in Parliament where there has been such consensus of interest and so many Members have attended when they do not have to be in the Chamber as there is not a three-line Whip.
	I urge my hon. Friend to listen to what has been said tonight, and I urge the FSA to think again, and to ask itself what the problem is that needs fixing. These are all small businessmen and small traders; they are precisely the people we were saying throughout the election campaign that we wanted to help, yet these proposals of ours are likely to put large numbers of them out of business.
	Finally, I want to refer to the point made by my hon. Friend the Member for Aberconwy (Guto Bebb). I represent a rural area, and I know that banks have closed many of their branches in the high streets of my small market towns. If the IFAs are driven out as well, a lot of my poorer constituents will be left without any form of independent financial advice at all, at a time when the banks, if they are there at all, are offering a reduced service.
	My hon. Friend the Financial Secretary is a reasonable man, and I ask him, please, to listen carefully to what has been said tonight. We need to have a rethink on this matter.

George Hollingbery: I, too, will abandon my notes this evening, and restrict my remarks to one or two brief points.
	Most of the topics have been more than adequately covered. There have been a great many well-made speeches in which many powerful points were made. There has been a lot of discussion about grandfathering, and I think it is worth pointing out that there are other ways in which IFAs could be grandfathered into the industry other than just a blanket allowance so they can all carry on practising. For example, would it not be possible for IFAs with more than X years of experience to continue advising clients who had been on their books for more than Y years, with their clients' written consent? I can see no particularly good reason why people should not be able to elect to do that.
	Also, if an IFA has X years of experience with no established complaint against their name, might they be able to pay to have an independent examination of their records to establish whether they had been responsible for some of this alleged mis-selling which the FSA is so clear has been going on behind the scenes, but which has not been recognised by many clients? It seems to me that there are ways forward that the FSA could follow to make sure we get the benefit of the experience that exists in the IFA community, and which otherwise looks as though it is going to be lost.
	I am very worried that in the short term newly qualified advisers may lose out on the chance to be mentored by experienced colleagues, particularly if large numbers leave the industry. We may well also find that a number of clients suddenly lose the person from whom they have received advice very happily for a number of years, and they might not be at all confident or happy to change that adviser. At a time when clearly so many people have neglected to provide for their later years, it seems to me perverse that we should be reducing the number of suppliers in the market.

Sarah Newton: Does my hon. Friend agree that at a time when the Government are making such welcome reforms to our pensions system, people will need independent advice more than ever, and if we press on regardless with these changes there will be increased costs and less access to such independent advice?

George Hollingbery: My hon. Friend's point is, of course, very well made. With auto-enrolment schemes more advice, rather than less, is going to be needed, and there is no doubt in my mind that we need more advice right now. In short, the FSA still has not answered a large number of questions adequately, and I will certainly not be convinced that the retail distribution review is adequate or worth while until we receive some of those answers.

Pauline Latham: I congratulate my hon. Friends the Members for Wyre Forest (Mark Garnier) and for West Worcestershire (Harriett Baldwin) on securing this debate and on the passion with which they made their points. Indeed, I congratulate all hon. Members in the Chamber on their passion and strength of feeling about this review.
	I have been contacted by a large number of constituents who work in this sector and are worried that the retail distribution review will have many unforeseen negative impacts on their employment. I hope that the review is not a knee-jerk reaction to the recent financial crisis.

Neil Carmichael: A recurring theme of this debate has been the heavy-handed nature of the Financial Services Authority: people have said that a sledgehammer is being used and so on. Is it not time for us to recognise that it ought to be held properly accountable, just as other quangos are and just as we intend them to be? This persistent theme is at the heart of this discussion and we need to address it.

Pauline Latham: I am sure that the Minister will take my hon. Friend's views forward, and I thank him for the intervention.
	I believe it is right that the customer is always put first when it comes to their money. We cannot go back to the financial irresponsibility that led us into the crisis in 2007, which we are, thankfully, just getting out of. Therefore, splitting the financial advice sector into two is probably a good thing, but we must make sure that the advice given by advisers in the primary sector will not stop people moving into a financial position where they will require the full range of services offered by the higher financial advice sector in the future.
	My constituents have also suggested that the proposed regulation will force between 30 and 40% of financial advisers to leave the sector, and many hon. Members have mentioned figures of 20, 30 or 40%. It is vital that that does not happen. As my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) said, we are in the business of keeping small businesses and promoting them. We need to do that in this instance, because we do not want all these people to be out of work at a time when life is difficult.
	Training and recognised qualifications are important, as they demonstrate to the customer that the financial adviser they are employing to deal with their future can be trusted. If we all agree that there should be a better qualification, surely it be for those new to the sector and not for those who have had the years and years of experience that we have heard about in various examples. If this proposed qualification is to be in place by 2013, surely we will be rushing it and too many people will be trying to do it, so there will not be enough providers to allow this to happen.
	What will happen to all these people who leave the sector in the rural areas and small towns? Very often there are not many of these people in such places. It might be fine if this occurs in cities, where more choice is available, but there is not a lot of choice in rural areas. There is a worry that a lot of the people who will need to take this qualification if it is imposed will not be able to do so in the short time available to them before 2013. Nick Cann, chief executive of the Institute of Financial Planning, has said that the FSA must develop a "catastrophe strategy" in case it reaches June 2012 and half of the advisers are not meeting the RDR requirements.
	The other concern that the financial advisers in my constituency have mentioned is that the proposed changes to the sale of financial advice will lead to customers being worse off, as they will not be given the range of options currently on offer. Surely, if anything, we should be looking at providing choice for people. Leading critics suggest that the more lucrative financial advice roles will be moved to the banking sector, which will mean that customers will be offered only options that benefit the bank.
	Interestingly, the mystery shopping exercise carried out by Which? across the industry concluded that its
	"surveys tend to show that IFAs perform better than banks."
	Based on all the evidence that we have heard tonight, I believe that, irrespective of whether it is the desired outcome or it happens by mistake, the increase in the role of the banks in the financial advice sector is wrong and worrying, and that we should be looking at providing choice.
	Richard Howells, the director of Zurich Life, said in June 2009:
	"The big question...is still around what benefit it will have for the ultimate consumer. I am still not convinced that all of these changes, when you sit down with a consumer and explain them, actually give rise to a consumer benefit that I can...hang my hat on."
	I believe that the aim of the RDR is vital in ensuring that the consumer is defended and our financial sector is strengthened in the light of the recent crisis, but I do not believe that the changes need to be made as the FSA says at the moment. I simply ask the Minister to ask the FSA to reconsider the outcomes of the review and to ensure that its original aims, set out when it began back in 2006, have outcomes that will be advantageous for the whole sector and, more particularly, for the customer, whom we should be protecting. I am sure that the Minister will ensure that the passionate arguments made in the Chamber tonight are taken forward and that they will colour his views.

Matthew Offord: The FSA has been held by some observers to be weak and inactive in allowing irresponsible banking to precipitate the credit crunch in 2007, which, as many Members will know, involved the shrinking of the UK housing market, increased unemployment, the public acquisition of Northern Rock, and the takeover of HBOS by Lloyds TSB. I remain fundamentally concerned that we have allowed the same organisation to undertake a review of independent financial advisers in this country.
	As you are no doubt aware, Mr Speaker, the FSA has devoted massive resources to the RDR over the last three years, during which time it had taken its eye off the ball so far as the banks were concerned. Ironically, the FSA's light-touch regulation of the banks, which are, as many Members have said, responsible for the vast bulk of consumer complaints, went on simultaneously with the massive intensification in regulation of financial advisers, who cause hardly any complaints to the Financial Ombudsman Service.
	That all came at a time when the mortgage market virtually ceased to exist for financial adviser firms through a combination of tighter lending criteria and positively anti-competitive practices such as dual pricing by lenders. As a result, many financial advisers and mortgage advisers have gone out of business and many more will face the same fate in the next few years.
	The sector employs thousands of people, such as my constituent David Barnett who is listening not so far away, and advises millions of others, such as me. Many people will struggle in the years of austerity to come, and those people-our electors-need us to help them to balance their budgets and avert financial disaster when the worst happens. They are looking to us to do that tonight. We must also look towards the financial advisers, many of whom are part of the creation of small and medium-sized economies in rural areas and in some suburban areas, such as my constituency.
	The RDR is a long and complex affair, and I shall not repeat the details now. My understanding from my constituents is that it boils down to two main themes-remuneration and qualifications. As it stands, it looks as though the entire remuneration system will be changed to one that will cause confusion, confrontation and a loss of service to the mass market. Qualification requirements are being ramped up and thousands of advisers are under pressure to gain their diplomas before 31 December next year. At the very time when business conditions have never been more difficult, advisers are being forced to spend hundreds of hours earning diploma points when they could be earning a living for their families.
	The latest directive from the FSA is a requirement that whenever a life assurance policy is sold financial advisers must illustrate to the client the total premium cost over the entire policy term. The total cost of a life assurance policy is irrelevant-the only costs relevant in the purchase of life cover are that the premiums for the contract recommended are demonstrably fair and competitive for the type and extent of cover being bought when it is bought in a free market and that they consider the potential cost to the client and the client's family of not having the cover if he or she suffers disabling ill health or death. Requiring an illustration of the total cost over a period of 20 to 25 years simply creates an off-putting and distorted impression to the consumer. Financial advisers are being asked to spell out the total theoretical cost of life cover and thereby to accentuate its negative aspects. A simile for this would be vehicle manufacturers giving prospective purchasers the likely finance, running and maintenance costs of the vehicle they are selling over its projected life. The FSA has gone too far. In fact, it went too far a long time ago, although it should certainly ensure that advisers are competent and honest.

Richard Graham: Does my hon. Friend agree with the former chief ombudsman that the idea that complaints will go down after the RDR is wishful thinking? Does he agree with the head of HBOS that the main beneficiaries of RDR will be the bank assurers? We are looking at the law of unintended consequences.

Matthew Offord: I certainly do agree with my hon. Friend and many others who have made the same point. The main beneficiaries will be the big banks, including many of those that got us into the difficult situation that the coalition Government are having to address.
	I should like the FSA to keep its nose out of normal commercial transactions and to leave business to businessmen such as the many constituents who have been mentioned tonight. If the FSA should be giving the public any message, it should be, "Protection is valuable and essential, so you should see an IFA and get some." Instead it gives out the message, "Look how much you'll spend over the life of a policy," without addressing the benefits of that policy.
	Independent financial advisers would like to be left to get on with their jobs, employ people, pay their taxes and look after their clients. They create wealth, look after our voters and, unlike the massive, over-complicated, expensive and unnecessary changes proposed by the FSA in the RDR, their requests are very small, simple, cost-free and necessary. They are just asking the Government to direct the FSA to revise the outcome of the RDR so that there is no change whatever to the current rules on remuneration and disclosure and to move the deadline for diploma qualification to 1 January 2016. I ask the Minister to ensure the same.

Anne-Marie Morris: I will make my comments brief because I am conscious that we are short of time. In my constituency, I have more than 50 very small independent financial advisers, a number of whom have come to speak to me about this issue because they are very concerned about the future of advice in our very needy constituency, which has four towns and 30 tiny villages. Those people serve the financial needs of the community.
	We need to consider the increasing overall need. Students are increasingly going to need help to sort out how to finance their education. People in or out of work are increasingly going to have deal with redundancy and will want to know what to do when they suddenly get that lump of money to keep them in health. People will want to know what to do with a small inheritance should they be so lucky to get one. For the elderly, the change in pension provision is extraordinary and we will have to help people to deal with pension auto-enrolment-should they fall out of it or stay with it? There is much to consider and much help is needed.
	Of course there are IFAs who have a bad reputation. Some sold products when it was inappropriate to do so just to maximise commission, some sold badly performing products and others mis-sold precipice bonds, which was unforgivable. With a cost of £45 million a year to the consumer, we need to address this issue, but what can we do? The retail distribution review is absolutely welcome, but we must strike a balance. We must get something affordable and the FSA must enable IFAs to remain in business while protecting consumers. How can we do that? The Government have said that 50% of IFAs in the profession would already comply, so what of the other 50%? Clearly, there is an issue and we need to make sure that more of those people stay in rather than fewer; otherwise, the predicted savings to consumers of £1.8 billion will not be made. That is not what this Government are all about, so we need to consider a different way of proceeding.
	I spent 30 years in a profession that has parallels with this one and I should like to draw the House's attention to some parallels that might help the Minister. In my time as a lawyer, I looked at the changes that the Law Society wanted to bring about when it considered introducing continuous professional development for older members of the profession. Instead of putting 35 hours in place immediately, the number of hours was slowly ramped up over a five-year period. The scheme did not just enable people to have out of office time; study time in the office and in the evening counted as well, which was helpful. I suggest the Minister looks at that system. We need to look at a modular approach for exams and at distance learning. As one of my hon. Friends pointed out earlier, we need to look at qualifications that are relevant to the business the individual is practising.
	I wholeheartedly support the comments that have been made about experience and the idea of grandfathering. I was formerly a professional mentor, and with the European Mentoring and Coaching Council I looked at how we might develop qualifications and accredit people already in a profession. We looked at a framework model that enabled people to qualify when rules changed. I certainly commend that to the Minister.
	The point about the big bang in 2013 when everything will change is absolutely right. That is not an appropriate way forward. I hope the Minister recognises that the businesses we are talking about are microbusinesses. Costs are crucial. Fees for IFAs have gone up by 4.8% this year, and I hope he is not thinking about the national financial advice service, at a cost of £50 million to the industry, replacing in any way the financial advisers who will undoubtedly fall out of the system.

Christopher Leslie: I congratulate the hon. Member for Wyre Forest (Mark Garnier) on initiating this well-subscribed and, so far, very moderate and well-tempered debate on behalf of the 33,000 independent financial advisers in the industry. Clearly, the matter is of concern. I suspect the Minister is thanking his lucky stars that we do not have a votable motion at the end of tonight's portion of the debate, as we did in the earlier section on banking reform.
	The Financial Services Authority started the retail distribution review many years ago. A consultation paper came out in 2009. Earlier this year, we had the proposals, although they will not come into force until 2012, so this is a useful period when the House should debate and consider them. It is a matter of regret that too few of these crucial regulatory issues are subject to parliamentary scrutiny, as Government Members have observed.
	Some extremely legitimate points have been made about the need for sensible transition-if we are to have change-to new arrangements, which, in the words of the hon. Member for South Derbyshire (Heather Wheeler), do not throw the baby out with the bathwater. That is one of the phrases in the debate that particularly comes to mind, but a number of points were very well made, especially when we think about the comments of the chief executive of the FSA. Is it really acceptable that between 10% and 20% of the profession could leave as a result of the retraining requirements, shrinking the availability of independent advice? The hon. Member for West Worcestershire (Harriett Baldwin) rightly questioned what would happen if a Minister were to stand at the Dispatch Box and announce the demise of a similar proportion of an industry.
	It is important that we take a pro-consumer approach to regulatory change-as the Opposition certainly do. Undoubtedly, it is necessary from time to time to look at the framework within which consumers get that advice, and I do not begrudge the FSA's moving in that direction. However, there are some serious questions. On balance, it is right that we move away from fee structures that are, to a certain extent, hidden in the margins, where sometimes commission may not be transparent for customers and products are recommended even though it does not necessarily say on the tin how much of the fee will be returned to the adviser, but-

Graham Stuart: Will the hon. Gentleman give way?

Christopher Leslie: I just want to make a point about the ending of the commission system and the placing of the fee, perhaps straightaway, in an up-front form for the consumer. There may be risks that are similar to those related to the argument about up-front tuition fees, because people may be deterred from taking the advice in the first place. They may feel that the system is too difficult. As my hon. Friend the Member for Barrow and Furness (John Woodcock) said, we have to ensure that any fees are disbursed throughout the period of the product.

Graham Stuart: There will always be some form of bias in the system, at least conceptually, regardless of how we reward IFAs. Whether or not there is a fee-based system, they will still be more likely to receive a fee if they propose the sale of a product. Does the hon. Gentleman believe that getting rid of commission is the right way to go? Why not regulate from the product end? Why not get rid of 10% commission, if that is felt to be a gross abuse? Why not limit the size but allow commission, which the public understand and quite like if it does not force them to pay up front, which it seems from surveys they do not wish to do?

Christopher Leslie: As I say, this is a good time to debate those matters. There are options that must be explored. We have not bottomed out the debate. Perhaps the Financial Services Authority can consider not necessarily the hon. Gentleman's suggestion in particular, but why commission changes are not being made across the wider financial services sector. There have been historic problems with mis-selling of products, not solely from an IFA perspective, and I can see why many people feel that these changes are necessary.
	I would not counsel hon. Members to take issue with every section of the RDR-many of those who spoke in the debate did not. It is right, for example, that there should be proper clarity between independent and restricted market advisers, and that rather than waiting for the customer to inquire, there should be full disclosure on that up front.

Alun Cairns: rose -

Christopher Leslie: I have only a couple more minutes.
	The crux of the matter must be the issue of qualifications-the A-level equivalent threshold for financial advice. Although I understand the move to a QCF level 4 standard, which seems entirely fair, it is sensible that there should be a mechanism to allow some sort of conversion of existing qualifications or existing experience to that new level 4 qualification. I cannot believe it is beyond the wit of the FSA, Ministers and others to find some way of doing that. Hon. Members such as the hon. Member for Meon Valley (George Hollingbery) spoke about how we should look at the grandfathering issue and what options there might be. It is important to move that forward.

Alun Cairns: rose -

Christopher Leslie: I should like to conclude because I want the Minister to be able to explain in a way that he did not necessarily do in the first flush of debate on the topic in Westminster Hall, and possibly reflect the views of the vast number of Conservative Members. I am still perplexed that the Financial Secretary to the Treasury chose that McDonalds diploma analogy. Perhaps he will reflect on that and recognise that some IFAs were slightly astounded by that reflection on their professional integrity. He might want to choose his words more carefully.
	It is important that parliamentary accountability should be voiced. The more I reflect on these financial services policy issues, the more it strikes me that there is a democratic deficit. No, we do not want to be embroiled in the day-to-day operational issues of regulation, but policy is policy and we are accountable for that. Perhaps, as my hon. Friend the Member for Leeds East (Mr Mudie) suggested, we can return to the issue when we come to the FSA reform Bill and discuss amendments to that. Hon. Members will log and remember today's debate and we can come to that later on in the day.
	It is a shame that there is no motion tonight on the issue. It would have been useful for Members to express the formal position of the House of Commons on the matter. This is a time for the Minister to listen to the debate and perhaps reflect carefully on the measured and worthwhile comments that have been made by hon. Members across the Chamber.

Mark Hoban: I congratulate my hon. Friend the Member for Wyre Forest (Mark Garnier) on the way in which he opened the debate this evening. He gave a balanced perspective on the changes that we are trying to make to improve standards for consumers, how that sits with the IFA sector and some of the challenges that a change in standards will create.
	It is worth reflecting for a moment on the responsibilities of Parliament and of the FSA. Parliament set out the framework by which the FSA operates. The Financial Services and Markets Act 2000 sets out its objective, powers and how it goes about exercising its responsibilities. For example, there is a requirement to consult. As we know, there has been a long process of consultation on the RDR since the previous chairman of the FSA raised the matter in 2006. There have been a number of iterations and debates about consultation documents and discussion papers. Consumer groups, product providers, IFAs and their trade bodies have participated in a very lively debate, but the FSA is rightly responsible for implementing day-to-day regulations, and I know that it takes very seriously parliamentary scrutiny of its role. I spoke to the chief executive this morning about the Treasury Committee's scrutiny last week and the debate this evening, so the authority is well aware of parliamentarians' concerns. It is right that the FSA gets on with its job but listens to the issues being raised.
	I counsel caution, however. It is all very well to think that we should engage in the regulatory regime when we think we are going to help one group or another, but there are times when regulators make difficult decisions on behalf of Parliament and our constituents, so we need to think very carefully about where the balance is struck. It might be very attractive in the context of this debate for Parliament to take more responsibility, but hon. Members might feel it less appropriate at other times.

Graham Stuart: Will my hon. Friend give way on that point?

Mark Hoban: No.

Graham Stuart: On that point?

Mark Hoban: No, I will not give way to my hon. Friend, because I have- [ Interruption. ]

Mr Speaker: Order.

Mark Hoban: I have about nine minutes to respond to quite a long debate in which a number of points have been made, and I want to take the opportunity to address some of those issues.
	Let me put on the record the importance that I place on independent financial advisers. They play a key role in helping people make financial product purchases and financial choices. High-quality, independent financial advice is vital in ensuring that people are encouraged to save and plan for the future and make the most out of their money. I have used independent financial advisers and been happy with the service I have received, because they have provided me with good-quality advice.
	I cannot overstate the detriment to consumers from poor and biased advice. Indeed, the FSA estimates the detriment to consumers from inappropriate advice to be £200 million per annum, and it thinks that the figure could be significantly higher. Consumer detriment has led organisations such as Which? and the consumer panel that advises the FSA to support the measures in the retail distribution review. We need to get that balance right and to address some of the issues that undermine consumer trust in the IFA sector, and the FSA has sought to do so through the RDR.
	I have become very conscious-in particular, over the past six or seven months as a Minister-of the financial services sector's increasing complexity, and consumers must be confident that IFAs are fully up to date and that their advice is underpinned by good technical knowledge. There can be few hon. Members who do not support that stance or recognise the benefits that increased professionalism can bring. Indeed, the FSA finds a clear link between increased qualifications for financial advisers and improved consumer outcomes. Under its reforms, consumers will be confident that their adviser has a minimum level of understanding and expertise that is maintained each year through continuing professional development.
	We should also recognise that a number of IFAs already comply with those standards. Just under half of IFAs already hold the required qualification and, indeed, many go beyond QCF level 4. Some 89% of advisers already meet the required hours each year for CPD, and we need to recognise the progress that has been made since examinations were introduced in 2008.
	I recognise the strength of the debate about grandfathering, and it is an important debate to have, but we need to think about how much experience is sufficient for people to be grandfathers, and about how we can ensure that that experience covers the range of products necessary to provide whole-of-market, independent advice. We ask people to advise on a range of products, such as pensions, insurance bonds and ISAs, and they need such technical knowledge to do so. Consumers are entitled to know that their adviser has a high standard of technical knowledge, and a minimum qualification standard should deliver that.
	The increase in standards will not discriminate against those who have kept up to date with market developments, and they should not have to commit a significant amount of time to study. As I have said, 90% of advisers already undertake the required number of hours for continuing professional development, and I think that over the next two years the measure can be used to fill any gaps between existing and revised standards. As a consequence of lobbying by the IFA community, the FSA has relaxed the regulations, so there will be non-exam-based alternative assessments, rather than formal written exams. That is an important move forward that the FSA has already made, but high standards of technical knowledge will be crucial to help IFAs navigate their clients through the increasingly complex choices that they have to make.
	I want to touch on the issue of adviser charging. I am strongly committed to increased transparency in financial services; it is important that consumers-whatever they are buying, be it advice or a product-understand the charges and the returns that they are likely to get. That underpins a whole range of work that we are doing at the moment in the Treasury.
	Currently, financial advisers can earn different amounts as commission payments, depending on which product they recommend and from which provider. How much they earn is not always transparent; indeed, Which? found that 82% of advisers failed either to explain the "key facts of cost" document or have a meaningful discussion with their clients about how their advice would be paid for. It is important that remuneration arrangements for advisers work in the best interests of consumers and promote independence of advice.
	A number of IFAs have already moved away from commission to a fee-based approach. I know that AIFA, the trade association for IFAs, is helping IFAs change their business model. I do not doubt the integrity of the vast majority of advisers, but no one can doubt the financial detriment caused to consumers as a consequence of mis-selling scandals of the past. Following the FSA's pensions review in 2002, 1.7 million consumers received compensation totalling £11.8 billion due to pension mis-selling alone.
	Advisers should welcome changes in remuneration as a clear way of building consumer trust in the sector. Consumers already pay for advice, as commission is deducted from their premiums or initial investments. Advice is not free; that money comes out of the contribution that consumers make to their pensions, their investment bonds or their savings for the future. However, it is important that both the cost and the value of advice is clear to consumers. These reforms will provide clarity on price and service and that will promote competition. Just as we want transparency on interest rates paid on ISAs to promote competition among ISA providers, I believe that transparency on IFAs' remuneration will also promote competition and provide a better understanding of the value of advice. It will increase consumers' confidence in that area.
	We want to broaden the range of advice available. A number of hon. Members have raised the annual financial health check that CFEB is going to organise. Let me be clear. The cost of that will be borne by a social responsibility levy that will be paid by institutions from Goldman Sachs through to the high street insurance broker. The cost will not be borne by independent financial advisers alone. The biggest firms, such as Goldman Sachs or Barclays, will make the biggest contributions, and they will make a far bigger contribution than IFAs. Furthermore, consumer credit organisations have also been brought into the scope of this; they will also have to pay their share towards the annual financial health check. It is important that the burden should be shared.

Graham Stuart: Will the Minister give way on that point?

Mark Hoban: I wish to conclude my remarks so that my hon. Friend the Member for Wyre Forest, who opened the debate, can conclude.
	We want a more responsible savings culture in Britain, in which people can plan confidently for their futures and are better able to realise their plans. Financial advice has a key part to play in that, and I want to see improved levels of expertise and knowledge and much greater clarity over transparency. It is important that the FSA should work closely with IFAs to get to that point. This evening's debate has helped the FSA understand the concerns of Members of Parliament. I am grateful to my hon. Friends for securing this debate.

Mark Garnier: I am conscious that I have just over one minute to sum up this incredibly useful debate. There has been an extraordinary amount of unanimity on both sides of the Chamber; the debate has been completely unpolitical. We have talked about financial inclusion for those who need help and about protecting smaller businesses. We have questioned why the RDR was necessary and talked about grandfathering. IFAs are singular in the sense that they are not allowed to be grandfathered; long-stopping is something else that they are singularly affected by. We have talked about pushing savers into the hands of the banks, even though the banks have a worse track record than the IFAs.
	Importantly, we have also talked about the fact that we need more time to address this issue. I completely appreciate that we have already had six years, but we are entering a period when European legislation will be affecting these matters as well. We are also seeing the FSA moving into areas covered by the Consumer Protection and Markets Authority and the Prudential Regulation Authority. There are ongoing changes that give us an opportunity to extend the period.
	I hope that three things have come out of the debate. First, Parliament has not had a chance to do this before because it is the first time that we have had such a Back-Bench debate, so will the FSA please listen following this new development? We have the feeling-
	 It being Ten o'clock, the motion lapsed (Standing Order No.24A).

Business without Debate
	 — 
	Estimates

Motion made, and Question put forthwith (Standing Order No. 145),
	That this House agrees with the Report [24 November] of the Liaison Committee. -(Bill Wiggin.)
	 Question agreed to.

Committees

Mr Speaker: With the leave of the House, we will take motions 3 to 7 together.
	 Ordered,

Communities and Local Government

That George Freeman be discharged from the Communities and Local Government Committee and Mark Pawsey be added.

Justice

That Jessica Lee and Anna Soubry be discharged from the Justice Committee and Ben Gummer and Elizabeth Truss be added.

Scottish Affairs

That Mark Menzies and Julian Smith be discharged from the Scottish Affairs Committee and Mike Freer and Simon Reevell be added.

Treasury

That David Rutley be discharged from the Treasury Committee and Mr David Ruffley be added.

Work and Pensions

That Richard Graham and Sajid Javid be discharged from the Work and Pensions Committee and Andrew Bingham and Brandon Lewis be added. -(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

DENTAL PRACTITIONERS

Motion made, and Question proposed, That this House do now adjourn. -(Bill Wiggin.)

Paul Beresford: I am particularly glad, Mr Speaker, that you are here this evening. I am also glad that my hon. Friend the Minister is on the Front Bench. I hope that he remains my hon. Friend by the end of the evening, but I have had some moments of doubt.
	As my hon. Friend is aware, I have a declarable interest in this subject. I am a very part-time practising dentist. I am a member of the British Dental Association, the British Dental Bleaching Society and the British Academy of Cosmetic Dentistry, and I have a link with Lockton, a dental indemnity insurer.
	Many of us in the real world of business had great hopes of the new Government, especially in the area of deregulation. Quangos were to be removed, or at least diminished in size, and bureaucracy was to be cut back. Indeed, many Departments have been spectacularly successful in this respect. The Minister's Department has shown an early positive approach, with plans to remove primary care trusts. Sadly, the Care Quality Commission, which was set up by the previous Government, has slipped through the net. This organisation is now displaying a cancerous bureaucratic growth that I would have expected from the combination of the previous Labour Government working hand in hand with some overbearing Labour council.
	In response to early consultation, members of the dental profession, particularly through their organisations, accepted that there should be regulation of the dental profession-they ought to, because there is plenty of that already-but they did not expect the monster that is now descending upon them. All dental professionals will be required to register with, and be regulated by, the CQC by April next year. The profession is being encouraged to do this online. The commission has made some efforts in that they undertook to warn dentists, and they even gave some dentists a registration number. Many dentists did not receive the notification; I am one of those. There are two stages that dentists need to complete. First, there is the enrolment form. To my mind, this form was relatively straightforward, but attached to it were barrel-loads of instructions-page upon page of confusing do's and don'ts that were excessive and confusing. After registration is accepted, registrants need to complete the CQC permission and validation form.
	Included in the second stage is a requirement for a Criminal Records Bureau check. Members of the dental profession are not required to obtain a standard CRB check but have to obtain an enhanced CRB check. This is the first example of the enormous bureaucracy and unnecessary duplication involved. It costs money and time to acquire. Forms have to be obtained, filled in and processed through one of the 100 or so Crown post offices. The Post Office is paid for the service by the dentist, as is the CRB. From time immemorial, the General Dental Council has kept a legal watchful eye over dentists in judicial matters. Any dentist who is convicted of a criminal charge is reported to the General Dental Council-that is simpler and involves only those very few members of the profession who are criminally convicted.
	As a dentist and MP, I witnessed the uproar that the last Government caused among the dental profession with the change in the contract for NHS dentists. I have to warn the Minister that the CQC is causing the same uproar. The difference now is that the condemnation by individual dentists and by every organisation related to dentistry is universal. These range from the British Dental Association and all the other similar professional organisations through to, curiously, a group of solicitors called the Dental Law Partnership. The intriguing thing is that the Dental Law Partnership is a group of solicitors with dental training who specialise in suing dentists-but they are on side this time.
	To quote Susie Sanderson of the British Dental Association, the CQC is currently seen as overbearing, inconsistent and duplicatory. The Health Department's impact assessment of the regulation of primary, medical and dental care providers, on which the proposed regulation of dental professionals by the CQC was based, failed to identify any sound evidence to support the proposition that the existing regulation of dental professionals or the systems in which they work in England, were ineffective. There is no reliable evidence base for the proposition that the current regulation of the dental profession by the General Dental Council, among others, fails to regulate the system of dental care, nor is there any reliable evidence that failings of the GDC place patient care at risk.
	The attitude of the CQC at its explanatory road shows around the country and at meetings has been seen by those who have attended-I do not include myself-as overbearing and dictatorial. To make matters worse, its responses to questions at those meetings and on its helplines have been inconsistent. There is an apparent lack of understanding of dentistry and the dental profession. Perhaps that was most clearly emphasised at a lecture, when one of the CQC's senior members of staff failed to understand the difference between the British Dental Association and the General Dental Council.
	Even more maddening is that most, if not virtually all, of the proposed outcomes or targets set by the CQC are duplicated in the existing regulations set out in the General Dental Council's "Standards for Dental Professions" of May 2005. To exemplify that, I will list some of what the CQC calls outcomes-targets by any other name. Outcome 1 covers respect for individuals, outcome 2 is about consent to care and treatment and outcome 3 relates to fees. Those outcomes duplicate the GDC's existing regulations: standards 1, 2 and 3 of "Standards for Dental Professionals" of May 2005, standards 1, 2 and 3 of "Principles of Patient Consent", and standards 1, 2 and 3 of "Principles of Patient Confidentiality". The same applies to the outcomes relating to personal care, treatment and support, safeguarding and safety, and to outcomes 7, 8, 9, 10 and 11-all are covered by the GDC. The same also applies to the three CQC outcomes on the suitability of staff quality and management.
	Outcome 14 requires practitioners to demonstrate that ongoing training is taking place. However, the GDC already regulates the professional development of dentists and other dental care professionals. Continuing professional development is compulsory for registered dentists and dental care professionals to remain registered with the GDC and be permitted to practice. Dentists must complete 250 hours of CPD every five years, of which 75 must be verifiable.
	Outcome 17, on complaints against dentists, was a favourite of the Labour Government. It requires that there is a complaints and comments system, that there is support for complainants and that action is taken to address complaints. The General Dental Council also requires a practice to have a complaints procedure, so private practices and NHS practices are covered. An offshoot of the GDC, the Dental Complaints Service, deals specifically with patients' complaints, whether in the national health service or private.
	Outcome 10, on the safety and suitability of premises, duplicates matters under the jurisdiction of the Environment Agency, water companies and the Health and Safety Executive. The HSE has the power to enforce the requirement for practices to have a risk assessment. It also has jurisdiction over equipment and its use to ensure that it is properly maintained and serviced. I am sure that the Minister will have done some homework for tonight and will be aware that the fire prevention regulations also fall under CQC outcome 10.

Simon Burns: indicated assent.

Paul Beresford: The Minister is nodding sagely so perhaps I will believe him. The fire prevention regulations are enforced by the local fire authority and any CQC interest in that area is duplication. To my amazement, there is even duplication in the CQC requirements, some of which are addressed many times. For example, evidence that practices have appropriate confidentiality protocols in place must be provided to satisfy outcomes 1, 2, 6 and 21.
	Dental providers must comply with 28 standards, but there is no guidance on what the CQC requires as evidence of compliance. Furthermore, it is unclear who the auditors of the process will be. To give an example provided by people who have lobbied me, the NHS Partners Network and the NHS Confederation state that generally, their members have been subject to mixed messages and unclear instructions from the CQC about what to expect from it. They say that in the current financial climate, such uncertainty is particularly difficult for their members and runs the risk of adding significantly to costs without yielding safety and quality benefits. The ultimate guillotine is having one's practice shut down for failure to comply with a potential deadline of April next year, which is causing deep concern in the dental profession.
	Finally, I turn to costs. The current situation is that there is no fee for CQC registration. In contrast, my fee to be paid this month to the General Dental Council is £576, the same as for the majority of dentists. However, the CQC is consulting on proposed fees, which it wishes to divide up depending on the size of a provider. The fees proposed are disproportionate, as the lowest fee is to be £1,500, for a provider with one location, such as my own small, part-time surgery, whereas £48,000 is to be charged for a provider with 101 or more locations.
	One of the most glaringly ludicrous points is the extreme jump in fees from one level to another. For example, if a dental firm has 100 practices it will pay £24,000, but if it merely adds one more practice, its fees will double to £48,000. The situation has to be dealt with, and it is in the hands of the Minister and his colleagues to do so. The CQC is charging ahead blindly, apparently with little knowledge and with no response to concerns that have been expressed. It has finally agreed to sit down with the General Dental Council in the next week or two and discuss the potential duplications in registration costs.
	I understand that there are organisations similar to the CQC in Wales and Scotland, and both appear to be working closely with the GDC without duplication. The result is that the annual cost to Welsh dentists for their organisation is not between £1,500 and £48,000, but probably in the region of £80 and certainly less than £100.
	There is an opportunity for Ministers to act before it is too late, and before too much money is wasted. If necessary, the forthcoming Public Bodies Bill will enable Ministers to remove the CQC from its role of regulating dentists. I remind the Minister that all the problems that it is having with dentists, and dentists with it, are likely to be repeated, and more, in the case of general medical practitioners. They are next on the list.
	I await the Minister's considered response, and I hope that he will take a step back and promise to consider the points made by me and, in particular, by the many organisations that have lobbied on the matter. It would be helpful if there were a serious meeting between Ministers, the GDC, the CQC and the BDA. It is overdue.

Simon Burns: I begin by congratulating my hon. Friend the Member for Mole Valley (Sir Paul Beresford) on securing this debate on an issue that I know is of some concern to him and other dentists throughout England. He said at the beginning of his comments that he was a friend of mine and hoped that he still would be by the end of my speech. I echo that, because I, too, hope that we are still on friendly, and hopefully speaking, terms by the end of the debate.
	My hon. Friend will know that the coalition Government do not believe in regulation for the sake of regulation. However, there are areas in which regulation is important for the interests of vulnerable people who are less able than others to defend their own interests. The provision of health care and adult social care services is one such area, and since 1 April 2009, the Care Quality Commission has been responsible for regulating those sectors under the Health and Social Care Act 2008.
	The Government support the role of the CQC in ensuring that providers of health care and adult social care provide services that, at the very least, meet the essential levels of safety and quality that every patient and service user has a right to expect. I am sure that my hon. Friend would not argue with that, or with the enforcement powers that the CQC can use when providers fail to meet essential levels of safety and quality. He will be aware that the Government are committed to strengthening the CQC's role as an effective regulator of health and adult social care services in England.
	At the moment, NHS and private health care providers are registered by CQC under the 2008 Act, as are providers of adult social care. From April next year, providers of primary dental care and private ambulance services will also be registered. From April 2012, providers of primary medical care will be brought into the registration system.
	There are a number of reasons why it is right to bring primary dental care providers into registration and to require them to meet essential levels of safety and quality. First, the current regulatory systems for dentists focus on the competence of the individual. However, how organisations and systems are managed is just as important in protecting the safety of patients. CQC registration will provide the framework to ensure that the provider, as well as the individuals within it, meet essential levels of safety and quality.
	Secondly, increasingly complex treatments are being provided in primary care settings. For example, it is likely that more oral surgery will be carried out in primary care in future, and the General Dental Council has seen an increase in complaints about harm caused to patients by the placing of dental implants. Those developments make it even more important to ensure that providers have adequate systems in place to protect the safety of patients. Registration with the CQC will allow potential problems to be identified and addressed before they result in harm to patients.

Paul Beresford: The Minister mentioned the GDC and complaints about dental implants. There has also been an increase in poor endodontic work, all of which can be dealt with adequately by the GDC. The situation does not need a huge, monolithic organisation such as the CQC.

Simon Burns: I am very grateful to my hon. Friend for making that point. If he will bear with me, I will, at a slightly later stage in the course of my remarks, address whether working together can minimise the level of overlap so that there is no unnecessary duplication.
	Thirdly, registering primary dental care providers will ensure that the same levels of safety and quality are met irrespective of where care is provided. One patient could be treated in hospital where the quality and safety of their care is regulated by the CQC, while another receives the exact same treatment elsewhere without that same guarantee. Wholly private dental providers, treating some 7 million patients, are currently subject to no formal scrutiny of the service that they provide.
	Finally-I know that my hon. Friend has raised this subject in the past-registration will provide greater controls on the decontamination of used dental instruments. Guidance on decontamination is set out in "Health Technical Memorandum 01-05". Although that has no legal standing, the CQC can monitor whether providers, including those in the independent sector, meet its requirements by enforcing the cleanliness and infection control registration requirement.
	It is the view not just of the Government that the registration of dentists will bring benefits; that view is shared by the dental profession. Responding to the consultation on registration of dental providers with the CQC in June 2008, the GDC said:
	"We broadly welcome the establishment of the Care Quality Commission...Whilst we are responsible for the registration and regulation of the whole dental team, whether they work in the private or public sector, there has been no additional means of regulating wholly private dental services...up until now. We believe that this role can be covered by the CQC and would further enhance patient protection".
	The British Dental Association was equally supportive, saying:
	"Wholly private providers are currently unregulated (beyond individual professional regulation) and we believe it is essential for this to be addressed."

Paul Beresford: I actually touched on that at the beginning of my short address. The Minister has to realise that the consultation came before the CQC moved into the area of dentistry, before the BDA realised what the CQC was going to do and before the monolithic and, what I called, almost cancerous growth of this organisation.

Simon Burns: I am grateful to my hon. Friend for that intervention. As far as I know, however, the BDA was aware at the time that dentists were going to be registered under the CQC, and as I see it, the comments on the consultation process were made in the knowledge of that information.
	I know there has been concern among dentists about the potential impact of registration with the CQC, and my hon. Friend made an interesting and vigorous case highlighting what he perceived to be some of the problems. However, I have some sympathy with those dentists concerned that the process of registering with the CQC will be onerous and time consuming. I can assure him, however, that for the majority of dentists-those who already provide high-quality services-there will, to my mind, be no difficulty in meeting the essential levels of safety and quality.
	The experience of HTM 01-05 demonstrates this point. Before the introduction of the guidance, dentists raised concerns about the burden that complying with it would place on them. Only today, we have published the results of the dental national decontamination survey, showing that when HTM 01-05 was published in November 2009, about 70% of practices were already meeting the essential quality requirements for decontamination, with approximately a further 20% of practices very near the essential quality requirements. The remaining small minority of practices were not.
	This experience will, I believe, be repeated with CQC registration. Most dental providers already give their patients a high-quality service and will find that they already meet the registration requirements. In those relatively small numbers of cases where dentists do not meet essential levels of safety and quality, registration with CQC will force them to improve. This is the purpose of regulation, and such an outcome would result in safer and better dental care for patients.
	My hon. Friend has spoken about the potential for overlap in the role of the CQC and the General Dental Council in the registration of dentists, and he raised it again in his first intervention on me. I would like to address that point now. I read with interest the recent letter from a number of dentists in  The Daily Telegraph making the same point as him. The CQC and the GDC are working closely to ensure that the roles of the two regulatory bodies are closely co-ordinated. Indeed, the two regulators have agreed and set out a memorandum of understanding that explains how they will co-ordinate their activities and share information to ensure that they do not duplicate actions and therefore create any risk of double jeopardy. It is vital that CQC registration complements the professional regulation of dentists by the GDC. The important word there is "complements".

Paul Beresford: I spoke to the president of the GDC last week, and she said they are having a meeting to discuss this for the first time. So the Minister's information might have gone a little awry.

Simon Burns: I take on board what my hon. Friend says. However, the information I have been given, as I said earlier, is that the two regulators have agreed and set out a memorandum of understanding explaining how they will co-ordinate their activities and share information to ensure that they do not duplicate actions. I trust that that action is correct, I trust that they work closely together to achieve that aim, and I will certainly get back to him if-despite what I have been led to believe-that is not the case.
	My hon. Friend also referred to the proposed level of registration fees for dental providers. As he is aware, the Care Quality Commission is currently consulting on its proposals for annual registration fees, which will apply to all providers, including dentists, from April next year. I would like to emphasise that they are proposals for consultation. I would certainly urge all dentists in England to make their views known to the CQC through the consultation process as soon as possible, and certainly before it ends, on 17 January. I heard what my hon. Friend said, and I have seen the consultation document. I can only repeat-and repeat quite vehemently-that it is important that all dentists take part in the consultation process and ensure that the CQC is fully aware of their views before it ends. I should also add that the CQC's final fees scheme is subject to the consent of the Secretary of State. It would obviously be wrong of me to prejudge the consultation process or what will happen at its conclusion. All I can do is advise my hon. Friend and the profession to ensure that they lobby the CQC as part of the consultation, so that it is left in no doubt about the views and concerns of dentists on the issue.
	My hon. Friend also mentioned Criminal Records Bureau checks, which I know have been a particular issue for some dentists. CRB checks are important to ensure that those responsible for the delivery of services are fit to do so. In earlier registration rounds, CRB checks have revealed convictions that were not otherwise declared. Those dentists who already have a CRB disclosure countersigned by their primary care trust can use it for CQC registration. I know that there have been practical problems with getting the required CRB checks carried out, and I understand the frustration that this has caused for some dentists. As a result, the CQC has increased to 100 the number of post offices that can process CRB disclosures on its behalf. That will go some way towards helping to deal with some of the practical difficulties experienced in getting a CRB check. The CQC is also exploring with Post Office Ltd the possibility of extending the service to the entire post office network.
	Although there is a degree of anxiety among dentists about CQC registration, I hope-although I am not convinced-that I have reassured my hon. Friend that the majority of dentists, who already provide good services, have no need to fear CQC regulation. For the small number who do not provide a safe service, registration will provide an effective mechanism to bring about improvements for patients. Indeed, that is the very purpose of regulation.
	In spite of the concerns, I am pleased to have been told by the CQC that the registration of primary dental care providers is so far proceeding smoothly. More than 7,000 dentists, including nearly 1,600 who operate solely in the private sector, have enrolled in the CQC's registration process. The CQC has now invited those primary dental care providers to submit applications. I understand that the first completed application was returned to the CQC within three hours and that more than 400 applications for registration had been returned by the end of last week. With what I believe has been a good start, I am hopeful that the task of registering dental providers with the CQC will be completed on schedule by 1 April 2011, and that patients will have the assurance that whichever dental practice they use, whether NHS or private, they will receive care that meets essential levels of safety and quality.
	 Question put and agreed to.
	 House adjourned.